Federal Register / Vol. 75, No. 86 / Wednesday, May 5, 2010 / Proposed Rules 24549 

Relations with Native American Tribal 

Governments’’ (59 FR 22951). However, 

based on the DEA data, we revise our 

required determination concerning the 

Regulatory Flexibility Act. 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.) 

Under the Regulatory Flexibility Act 

(5 U.S.C. 601 et seq., as amended by the 

Small Business Regulatory Enforcement 

Fairness Act (SBREFA) of 1996), 

whenever an agency is required to 

publish a notice of rulemaking for any 

proposed or final rule, it must prepare 

and make available for public comment 

a regulatory flexibility analysis that 

describes the effect of the rule on small 

entities (i.e., small businesses, small 

organizations, and small government 

jurisdictions), as described below. 

However, no regulatory flexibility 

analysis is required if the head of an 

agency certifies the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

Based on our DEA of the proposed 

designation, we provide our analysis for 

determining whether the proposed rule 

would result in a significant economic 

impact on a substantial number of small 

entities. Based on comments we receive, 

we may revise this determination as part 

of our final rulemaking. 

According to the Small Business 

Administration, small entities include 

small organizations, such as 

independent nonprofit organizations, 

and small governmental jurisdictions 

including school boards and city and 

town governments that serve fewer than 

50,000 residents, as well as small 

businesses (13 CFR 121.201). Small 

businesses include: Oil and gas 

extraction and drilling, natural gas 

distribution, and mining concerns with 

fewer than 500 employees; oil and gas 

or mining support activities, water 

supply and irrigation systems, land 

subdivision, air traffic control and 

airport operations, and transportation 

support activities with annual average 

revenues of less than $6.5 million; 

construction-related businesses with 

less than $31 million in average annual 

revenues; and pipeline transportation of 

crude oil businesses with less than 

1,500 employees. To determine if 

potential economic impacts to these 

small entities are significant, we 

considered the types of activities that 

might trigger regulatory impacts under 

this designation, as well as types of 

project modifications that may result. In 

general, the term ‘‘significant economic 

impact’’ is meant to apply to a typical 

small business firm’s operations. 

To determine if the proposed 

designation of critical habitat for the 

polar bear would affect a substantial 

number of small entities, we considered 

the number of small entities affected 

within particular types of economic 

activities, i.e., oil and gas exploration 

and development, and marine and 

coastal development activities. 

Specifically, we identified 131 entities 

that may be impacted by the designation 

of critical habitat, and of these, 112 

entities meet the small business 

threshold. These entities include local 

governments (e.g., the North Slope 

Borough and the Northwest Arctic 

Borough), construction companies, 

specialty trade contractors, airport 

operations and support contractors, and 

other support contracting companies. In 

estimating the numbers of small entities 

potentially affected, we considered 

whether the activities of these entities 

may include any Federal involvement, 

in particular, activities that may trigger 

a consultation under section 7 of the 

Act. Critical habitat designation will not 

affect activities that do not have any 

Federal involvement; designation of 

critical habitat affects activities 

conducted, funded, or authorized by 

Federal agencies. 

If we finalize the proposed critical 

habitat designation, Federal agencies 

must consult with us under section 7 of 

the Act if their activities may affect 

designated critical habitat. 

Consultations to avoid the destruction 

or adverse modification of critical 

habitat would be incorporated into the 

existing consultation process. 

As described in Appendix A of the 

DEA, the potential impacts to small 

businesses are those associated with 

administrative costs resulting from the 

need to conduct consultations under 

section 7 of the Act. These costs 

associated with small businesses fall 

under two primary component 

activities: (1) Oil and Gas Exploration, 

Development, and Production, and (2) 

Construction and Development 

Activities. As discussed in Appendix A 

of the DEA, we anticipate both of these 

primary activities to be minimally 

impacted by a designation of critical 

habitat because they are generally 

covered by existing regional regulations 

(e.g., the MMPA’s incidental take 

regulations at (73 FR 33212, 71 FR 

43925)), or associated with section 7 

consultation processes. As a 

consequence, we anticipate only 

minimal additional regulatory 

involvement under the Act resulting 

from the designation of critical habitat. 

In summary, we have considered 

whether the proposed designation 

would result in a significant economic 

impact on a substantial number of small 

entities. For the above reasons and 

based on currently available 

information, we certify that, if 

promulgated, the designation of critical 

habitat for the polar bear would not 

have a significant economic impact on 

a substantial number of small business 

entities. Therefore, an initial regulatory 

flexibility analysis is not required. 

Authors 

The primary authors of this notice are 

the staff members of the Marine 

Mammals Management Office, Alaska 

Region, U.S. Fish and Wildlife Service. 

Authority 

The authority for this action is the 

Endangered Species Act of 1973, as 

amended (16 U.S.C. 1531 et seq.). 

Dated: March 19, 2010. 

Thomas L. Strickland, 

Assistant Secretary for Fish and Wildlife and 

Parks. 

[FR Doc. 2010–10512 Filed 5–4–10; 8:45 am] 

BILLING CODE 4310–55–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 253 

[Docket No. 0908061221–91225–01] 

RIN 0648–AY16 

Merchant Marine Act and MagnusonStevens Fishery Conservation and 

Management Act (Magnuson-Stevens 

Act) Provisions; Fishing Vessel, 

Fishing Facility and Individual Fishing 

Quota Lending Program Regulations 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Proposed rule; request for 

comments. 

SUMMARY: The Fisheries Finance 

Program (FFP or the Program) provides 

long-term financing to the commercial 

fishing and aquaculture industries for 

fishing vessels, fisheries facilities, 

aquaculture facilities, and individual 

fishing quotas (IFQs). The Program 

became a direct loan program, as a 

result of legislation in 1996, replacing a 

guaranteed loan program. The FFP 

collects loan principal and interest from 

loan recipients and fees from applicants 

in order to repay monies borrowed from 

the U.S. Treasury. It maintains fixed 

interest rates that are comparable to 

those of private sector lenders, however 

the FFP allows borrowers to prepay 

without penalty, and may carry longer 


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24550 Federal Register / Vol. 75, No. 86 / Wednesday, May 5, 2010 / Proposed Rules 

repayment periods that are more 

advantageous to borrowers. The FFP 

does not make loans for new vessel 

construction or for vessel 

refurbishments that would increase 

harvesting capacity. Since the 

publication of its current regulations on 

May 1, 1996, the Program’s authorizing 

statutes have been amended several 

times. However, the current regulations 

implementing the FFP have not been 

amended since 1996. Prior to the 2006 

amendments to the FFP’s statutory 

authorization, the 1996 rules for the 

Program were sufficient to implement 

the statute. The 2006 statutory changes 

have necessitated the current rules. In 

this action, NMFS amends our 

regulations to reflect the statutory 

changes to the Program, and to provide 

regulations for two additional lending 

products. 

DATES: NMFS invites the public to 

comment on this proposed rule. 

Comments must be submitted in writing 

on or before June 4, 2010. Comments 

will be accepted only on Subpart B. 

Subpart C is unchanged except for 

numbering, therefore, comments will 

not be accepted. 

ADDRESSES: You may submit comments, 

identified by 0648–AW05, by any one of 

the following methods: 

• Electronic Submissions: Submit all 

electronic public comments via the 

Federal eRulemaking Portal http:// 

www.regulations.gov. 

• Fax: 301–713–2390 x 187, Attn: 

Earl Bennett. 

• Mail: Earl Bennett, Acting Chief, 

Financial Services Division, NMFS, 

Attn: F/MB5, 1315 East-West Highway, 

SSMC3, Silver Spring, MD 20910. 

Instructions: All comments received 

are a part of the public record and will 

generally be posted to http:// 

www.regulations.gov without change. 

All Personal Identifying Information (for 

example, name, address, etc.) 

voluntarily submitted by the commenter 

may be publicly accessible. Do not 

submit Confidential Business 

Information or otherwise sensitive or 

protected information. 

NMFS will accept anonymous 

comments (enter N/A in the required 

fields if you wish to remain 

anonymous). Attachments to electronic 

comments will be accepted in Microsoft 

Word, Excel, WordPerfect, or Adobe 

PDF file formats only. 

Written comments regarding the 

burden-hour estimates or other aspects 

of the collection-of-information 

requirements contained in this proposed 

rule may be submitted to 

earl.bennett@noaa.gov and by e-mail to 

david.rostker@omb.eop.gov or fax to 

(202) 395–7285. 

FOR FURTHER INFORMATION CONTACT: Earl 

Bennett, at 301–713–2390 or via e-mail 

at earl.bennett@noaa.gov. 

SUPPLEMENTARY INFORMATION: The FFP is 

the lending unit of NMFS’ Financial 

Services Division. With its main office 

in Silver Spring, MD, the FFP currently 

has two distinct lending programs. One 

extends long-term direct loans to 

owners of vessels, fishery facilities and 

aquaculture projects, and the other 

extends long-term direct loans to 

fishermen for the acquisition or 

refinancing of quota shares in the 

Alaska halibut and sablefish IFQ 

fishery. 

Statutory and Regulatory Background 

The FFP’s primary statutory authority 

is found in Title XI of the Merchant 

Marine Act of 1936, as amended 

(codified at 46 U.S.C. 53701, et seq.). 

This law authorizes the Secretary of 

Commerce to guarantee the principal 

and interest of loans made to citizens of 

the United States for the construction, 

reconstruction or reconditioning of 

fishing vessels. Additional statutory 

provisions authorize specific loan 

programs, including the Bering Sea/ 

Aleutian Island Crab (BSAI Crab) IFQ 

lending program, 16 U.S.C. 1862(j), and 

the Western Alaska Community 

Development Quota (CDQ) lending 

program, 16 U.S.C. 1855(i)(1). The 

Magnuson-Stevens Fishery 

Conservation and Management 

Reauthorization Act, (MSRA), 46 U.S.C. 

53706(a)(7), also authorizes the FFP to 

provide direct loans to entities involved 

in the commercial fishing and 

aquaculture industries for activities that 

assist in the transition to reduced 

fishing capacity; for technologies or 

upgrades designed to improve collection 

and reporting of fishery-dependent data; 

to reduce bycatch; to improve selectivity 

or reduce adverse impacts of fishing 

gear; or to improve safety. The FFP does 

not lend for projects that increase 

harvesting capacity. 

Initially known as the ‘‘Fisheries 

Obligation Guarantee Program’’ (FOG), 

the Program originally provided 

repayment guarantees for fishery loans 

made to commercial fishermen. 

Borrowers executed promissory notes, 

backed by a U.S. Government guarantee; 

the Program then sold these guaranteed 

notes at auction to third party 

noteholders. Once a note was sold, the 

borrower was obligated to make 

payments directly to that third-party 

noteholder, rather than the government. 

In the event that a borrower defaulted 

on a guaranteed note, the noteholder 

was required to make a payment 

demand to the Program, which was 

required to pay the noteholder the 

outstanding principal and interest 

balance. The Program could then 

proceed to foreclose on the collateral 

pledged for the loan, or collect the loan 

directly from the defaulting borrower. 

On October 11, 1996, the Congress 

amended the Merchant Marine Act. In 

section 303 of the Sustainable Fishing 

Act (SFA), 46 U.S.C. 53701 et seq., the 

Congress transformed the Program from 

a loan guaranty program into a direct 

lending program. In response, FOG 

changed its name to FFP. These 

amendments allowed the re-designated 

FFP to function much like a private 

sector lender. Under the changes, the 

FFP borrows funds from the United 

States Treasury, and then lends these 

funds to members of the fishing 

industry. Although the Program 

maintained (and still maintains) a 

legacy portfolio of guaranteed loans, the 

amendments to the SFA allowed the 

FFP to make new loans directly to 

qualified borrowers without using 

private sector intermediaries. This 

structure for the Program is still in place 

today. Indeed, the Program’s loan 

portfolio performs well, with very few 

delinquent loans, and the FFP has been 

successful in maintaining a negative 

subsidy under Federal Credit Reform 

Act. The FFP is also authorized to 

refinance guaranteed FOG loans and 

transition them into direct loans, subject 

to the availability of lending authority. 

Refinanced FOG loans are subject to 

current FFP requirements. 

However, the FFP has not 

promulgated new regulations since May 

1, 1996, when the current regulations 

were published. (61 FR 19171). The 

regulations were not modified after the 

October 11, 1996, statutory amendments 

because the Program’s regulations 

worked with the new legislation. This 

action would modify the existing 

Program regulations to reflect these 

statutory changes, and, more 

importantly, includes proposed 

regulations for two new lending 

products, BSAI Crab IFQ and Western 

Alaska Community Development Quota 

(CDQ). Subpart C, relating to 

Interjurisdictional Fisheries, is 

unchanged by this proposed rule except 

for its redesignation. 

Description of Current Lending Policy 

Under present policy, the FFP accepts 

applications from a wide range of 

potential borrowers, including 

individuals, partnerships, corporations 

and other business entities. Acceptance 

of loan applications is dependent on the 

Program having loan authority. The FFP 


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1Ownership requirements for documenting a 

vessel for use in the coastwise trade and receiving 

a fisheries endorsement are identical. 

makes its lending decisions on a caseby-case basis. Like private sector 

lenders, the FFP considers typical credit 

factors such as the borrower’s 

demonstrated business ability and 

fishing industry experience, creditworthiness, compliance with specific 

loan program requirements, and 

available collateral, among others. The 

FFP declines to make loans to 

applicants who fail to prove that they 

are acceptable credit risks, as well as to 

any applicants that the Program deems 

ineligible or unqualified. In addition, 

the Program does not make loans for 

new vessel construction, or for vessel 

refurbishments that would materially 

increase harvesting capacity. 

Although 46 U.S.C. 53701 does not 

bar the FFP from financing new vessel 

construction or modifications that 

increase harvesting capacity, the FFP 

does not lend for these purposes in 

order to be consistent with the agency’s 

larger responsibilities to maintain 

sustainable fisheries. Additionally, in 

the past, the FFP’s annual lending 

authority has contained restrictions that 

prevented the FFP from making loans 

that increase harvesting capacity. 

Although some loan terms are set by 

statute (e.g., 46 U.S.C. 53702(b)(2) sets 

interest rate; section 53709(a)(4) restricts 

loan principal amounts to not more than 

80 percent of the aggregate project cost; 

and section 53710(a)(3) caps most loan 

terms at 25 years), the FFP does not 

maintain fixed, program-wide minimum 

collateral standards; instead, the FFP 

adjusts each loan’s collateral 

requirements as necessary. In addition 

to financing the purchase and 

acquisition of property in market 

transactions, the FFP may also liquidate 

assets (such as permits, quotas, licenses, 

transferable harvesting or operating 

rights, vessels, real estate, facilities, etc.) 

that the Program acquires through 

foreclosure, arrest, judicial sale, 

settlement of debts or obligations, debt 

acceleration, or other collection 

activities. Similar to other lending 

institutions, the FFP can provide 

financing to purchase assets the 

program liquidates. 

All loan applicants must either own 

or hold a long-term lease on the 

property that is the subject of the 

financing. The FFP requires first lien 

priority on all primary collateral (or 

adequate substitute collateral), and 

requires that borrowers obtain written 

approval for subordinate liens to third 

parties. By statute, FFP loans are 

authorized to carry maturities of up to 

25 years. However, generally the FFP 

restricts loan terms to the useful life of 

the assets being financed. If the property 

is leased, the lease term must exceed the 

duration of the loan, allow the FFP to 

place a lien or mortgage upon the 

leasehold, and authorize the FFP to 

transfer the lease to another party in the 

event of foreclosure. 

The FFP reserves the right to require 

additional lending and security terms 

and conditions to address specific 

borrowers and circumstances. The FFP 

will frequently require loan guarantees 

or security interests in other collateral to 

bring credit risk to acceptable levels. 

Such guarantees or collateral may be 

required from affiliated businesses, the 

borrower’s principals or majority 

shareholders, or any other persons or 

entities with a financial interest in the 

borrower, or any individuals holding 

community property rights with the 

borrower. The FFP requires that 

borrowers maintain insurance 

appropriate to the collateral, which may 

include casualty, personal injury, risk, 

breach of warranty, business 

interruption, key man life insurance, 

title policies, maritime coverage or other 

forms as the FFP determines necessary. 

Where appropriate, the FFP must be 

named as an ‘‘additional assured,’’ 

added to such coverage as a ‘‘loss 

payee,’’ or receive assignment of the 

policy and insurance proceeds. 

Applicants for FFP loans must be U.S. 

citizens or entities eligible to document 

a vessel for coastwise trade 1 under 46 

U.S.C. 50501. Essentially, this requires 

business entities to be 75 percent owned 

by U.S. citizens, with key positions and 

a majority of the board of directors (in 

the case of a corporation) being U.S. 

citizens. Individual applicants must be 

U.S. citizens, from any of the fifty states, 

the Commonwealth of Puerto Rico, 

American Samoa, the Territory of the 

U.S. Virgin Islands, Guam, the Republic 

of the Marshall Islands, the Federated 

States of Micronesia, the 

Commonwealth of the Northern Mariana 

Islands, or any other possession, 

commonwealth or territory of the U.S. 

All loan applicants are subject to 

background and credit investigations, 

which may include reviews for 

unresolved fishing violations, criminal 

background checks, delinquent debt 

investigations, and credit reports. 

Applicants, who are advised to apply 

for a loan through regional offices 

located in Gloucester, MA, St. 

Petersburg, FL, and Seattle, WA, must 

pay the appropriate application fee set 

out in 46 U.S.C. 53713(b). The 

application fee is one half of one 

percent of the loan amount requested. 

Half of this fee, known as the ‘‘filing 

fee,’’ is nonrefundable when the 

Program officially accepts the 

application. The second half of the fee, 

known as the ‘‘commitment fee,’’ is 

earned and becomes nonrefundable 

when the Program issues an Approvalin-Principle (AIP) letter. The Program 

may refund the commitment fee if the 

FFP declines the application or the 

applicant withdraws the request prior to 

the Program issuing an AIP letter. 

The AIP letter sets out loan terms and 

conditions. These terms and conditions 

are issued at the Program’s discretion; 

an applicant’s failure to accept them 

may result in the termination of the 

processing of the loan. Moreover, the 

AIP’s terms and conditions are reflected 

in the Program’s closing documents. 

Traditional Lending: Vessels, Shoreside 

Facilities and Aquaculture Projects 

Borrowers of FFP loans can use FFP 

financing to purchase or refurbish an 

existing fishing vessel, as well as 

finance the purchase, renovation or 

construction of a fishing facility (such as 

a processing plant) or an aquaculture 

facility. Although the FFP will not 

finance the construction of new vessels, 

borrowers may use Program funds to 

refinance the construction costs of a 

completed vessel. However, the loan 

applicants must have already paid or 

financed such construction costs prior 

to the submission of their loan 

application. FFP lending, as required by 

the MSA, as amended, Public Law 109– 

470, can also be used ‘‘to finance 

sustainable fisheries efforts, including 

activities that assist in the transition to 

reduced fishing capacity, technologies 

or upgrades to improve collection and 

reporting of fisheries data, to improve or 

reduce adverse affects of fishing gear, or 

to improve safety. 

In addition to meeting the FFP’s 

general lending requirements, borrowers 

must show that their vessels or facilities 

have all the applicable permits, licenses, 

quotas, entry rights, or other 

authorizations necessary to harvest or 

operate their vessels or facilities in 

accordance with the appropriate 

fisheries management plan (FMP), 

implementing regulations and all other 

applicable Federal, state and local laws. 

Current IFQ Lending: Halibut and 

Sablefish 

The 1996 SFA amendments also 

authorized the creation of IFQ lending 

programs, identifying two categories of 

eligible borrowers. Under the 

Magnuson-Stevens Fishery 

Conservation and Management Act 

(MSA), section 303(d)(4), now codified 

as 16 U.S.C. 1853a(g), the FFP provided 

IFQ financing for (1) the acquisition of 


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IFQ by fishermen who fish from ‘‘small 

vessels,’’ and (2) the first time purchase 

of IFQ by ‘‘entry level fishermen.’’ IFQ 

financing is fishery specific, and 

individual Fishery Management 

Councils (FMCs) must request such 

financing, and may specify borrower 

eligibility criteria (such as definitions 

for ‘‘small vessels’’ and ‘‘entry level 

fishermen’’). Under the legislation, the 

FFP cannot initiate or implement an IFQ 

lending program until the appropriate 

FMC submits a request and provides 

guidance for the requisite criteria. 

Although the Program suggests that 

these criteria be included as a part of a 

fishery management plan (FMP), the 

FFP will accept formal FMC action and 

transmittal of the criteria to develop and 

create a lending program. 

The two categories of potential 

borrowers for the quota share loan 

program are fishermen who fish from 

small vessels, and entry level fishermen 

in the North Pacific Halibut and 

Sablefish fisheries. Under the MSA, as 

amended, ‘‘Fishermen who fish from 

small vessels’’ are defined as those 

fishermen wishing to purchase IFQ for 

use on category B, C or D vessels (as 

defined by 50 CFR 679.40), ‘‘whose 

aggregate ownership of individual 

fishing quotas will not exceed the 

equivalent of a total of 50,000 pounds of 

halibut and sablefish harvested in the 

fishing year in which a [loan] 

application is made if the [loan] is 

approved, who will participate aboard 

the fishing vessel in the harvest of fish 

caught under such quotas, who have at 

least 150 days of experience working as 

part of the harvest crew in any United 

States commercial fishery, and who do 

not own in whole or in part any 

Category A or Category B vessel.’’ ‘‘Entry 

level fishermen’’ are similarly defined, 

but under the statute this group need 

not have demonstrated fishery 

experience, and do not need to own 

halibut and sablefish quota shares 

before receiving a Program loan. Entry 

level fishermen may finance an initial 

quota share purchase that is equivalent 

to not more than 8,000 pounds of IFQ, 

as calculated in the year they apply. 

Under the present regulations, FFP 

loans for the HSQS program are 

awarded on the basis of the FFP’s 

general lending requirements. In 

addition, the FFP requires that preferred 

ship mortgages be placed on all 

Federally documented vessels owned by 

IFQ borrowers. For borrowers 

refinancing existing debt, the FFP will 

not close loans that exceed the 

outstanding amount of debt being 

refinanced, in order to prevent Program 

funds from being used for ineligible 

purposes. Refinancing is also subject to 

a cap of 80 percent of the principal of 

the loan; however, if the current market 

value of the quota shares exceeds the 

loan amount by 20 percent or more, a 

borrower can refinance without 

providing additional down payment. If 

the applicant has insufficient equity in 

the collateral, the applicant is required 

to pay the debt down to the acceptable 

80 percent level. 

The Program requires that each 

applicant for sablefish or halibut IFQ 

demonstrate how it meets or will meet 

the relevant statutory conditions at the 

time of application. To calculate pound 

limits, the FFP applies the IFQ limits for 

the year in which the borrower submits 

the application. This allows the FFP to 

use the most recent IFQ pound limit 

when determining loan eligibility. 

HSQS loans contain covenants requiring 

that the Program’s borrowers be aboard 

their vessels as the IFQ from their 

NMFS financed quota shares are fished. 

However, the Program does not read the 

statutory text as creating a permanent 

onboard participation requirement. 

Instead, the condition is included 

among a series of eligibility conditions 

for originating a loan, and the FFP has 

interpreted it to require that a borrower 

(1) express the intent to participate 

aboard when he or she applies for a 

HSQS loan and; (2) actually be aboard 

the vessel while the IFQ from each 

NMFS financed quota share is harvested 

over the course of a fishing season. 

Accordingly, a borrower under the 

HSQS could meet the statutory onboard 

participation requirement during the 

first season of fishing after purchasing 

quota share with loan proceeds. 

However, in keeping with the North 

Pacific Fishery Management Council’s 

(NP Council) expressed policy to 

maintain the small boat halibut and 

sablefish fisheries as ‘‘owner operated’’ 

fisheries, HSQS loan documents contain 

additional covenants requiring that the 

Program’s borrowers declare annually, 

under penalty of perjury, that they were 

aboard the vessel as fish were harvested 

under the IFQ derived from their NMFS 

financed quota shares. The FFP may 

waive the onboard participation loan 

covenants at the request of the borrower, 

(e.g. to accommodate medical IFQ 

transfers), provided that the borrower 

can obtain permission from the 

Restricted Access Management (RAM) 

Division of NMFS Alaska Regional 

office or appropriate office. The Program 

defers to RAM, or to the office that 

undertakes the duties of this division to 

issue or manage quota shares and the 

NMFS Alaska Regional office, in 

determining who is eligible to fish 

under the HSQS. The FFP will not make 

an HSQS loan to anyone who lacks 

RAM certification of eligibility for the 

halibut or sablefish fisheries. 

Between FY98 and FY08, the FFP 

approved 240 applications for halibut 

and sablefish IFQ loans. The average 

amount of these loans amounted to 

$154,209. 

Proposed Provisions: CDQ Lending 

Program 

In 1992, the NP Council established a 

Community Development Quota (CDQ) 

Program. The intent of this program is 

to promote fisheries-related economic 

development in disadvantaged Western 

Alaska communities. See Guard and 

Maritime Transportation Act of 2006, 

Public Law 109–241, section 416(a). The 

remote and isolated nature of Western 

Alaska limits employment opportunities 

of most residents to jobs within their 

communities, and these areas suffer 

from high unemployment and poverty 

levels. The CDQ Program was created to 

provide long-term loans to assist these 

communities in developing the 

harvesting and processing capability in 

local Bering Sea and Aleutian Island 

fisheries. Although statutory authority 

for the CDQ Program dates back to 1998, 

funding for the program was not made 

available until 2006, Public Law 109– 

241, section 416(a). Through these 

regulations, the FFP intends to 

implement this program. 

Unlike the FFP’s other lending 

programs, the CDQ Program would 

allow the FFP to award loans with 

maturities of up to thirty (30) years, 

although the Program has the discretion 

to use shorter periods. Aside from 

extended maturities, CDQ loans are 

subject to the Program’s general lending 

standards and practices; collateral, 

guarantee and other loan requirements 

may be adjusted to account for 

individual credit risks. Entities eligible 

to participate are set forth in 16 U.S.C. 

1855(i), and include: 

(1) The villages of Akutan, Atka, False 

Pass, Nelson Lagoon, Nikolski, and 

Saint George through the Aleutian 

Pribilof Island Community Development 

Association. 

(2) The villages of Aleknagik, Clark’s 

Point, Dillingham, Egegik, Ekuk, Ekwok, 

King Salmon/Savonoski, Levelock, 

Manokotak, Naknek, Pilot Point, Port 

Heiden, Portage Creek, South Naknek, 

Togiak, Twin Hills, and Ugashik 

through the Bristol Bay Economic 

Development Corporation. 

(3) The village of Saint Paul through 

the Central Bering Sea Fishermen’s 

Association. 

(4) The villages of Chefornak, Chevak, 

Eek, Goodnews Bay, Hooper Bay, 

Kipnuk, Kongiganak, Kwigillingok, 

Mekoryuk, Napakiak, Napaskiak, 


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Newtok, Nightmute, Oscarville, 

Platinum, Quinhagak, Scammon Bay, 

Toksook Bay, Tuntutuliak, and Tununak 

through the Coastal Villages Region 

Fund. 

(5) The villages of Brevig Mission, 

Diomede, Elim, Gambell, Golovin, 

Koyuk, Nome, Saint Michael, Savoonga, 

Shaktoolik, Stebbins, Teller, Unalakleet, 

Wales, and White Mountain through the 

Norton Sound Economic Development 

Corporation. 

(6) The villages of Alakanuk, 

Emmonak, Grayling, Kotlik, Mountain 

Village, and Nunam Iqua through the 

Yukon Delta Fisheries Development 

Association. 

(7) Any new groups established by 

applicable law. 

Proposed Crab IFQ Lending Program 

In addition to proposing regulatory 

language for the CDQ Program, this rule 

would implement the Bering Sea/ 

Aleutian Island (BSAI) crab IFQ quota 

lending program. FFP lending for Bering 

Sea/Aleutian Island (BSAI) crab IFQ 

quota shares, which is an integral part 

of the crab rationalization program 

developed by NP Council, will be 

limited to specific crab fisheries and 

those persons identified as ‘‘captain’’ or 

‘‘crew’’ on a BSAI crab fishing vessel. 

Additionally, like other FFP loans, crab 

quota share loan amounts will be 

limited to 80 percent of the actual 

purchase price, and carry a 25-year 

maturity. Captains and crew must be 

deemed eligible by a RAM or 

appropriate authority to own Crab QS, 

and meet all other applicable provisions 

of the Bering Sea and Aleutian Islands 

King and Tanner Crab Fishery 

Management Plan (Crab FMP) and its 

implementing regulations in effect at the 

time of their loan closing. The Program 

will rely on RAM to determine that the 

applicant meets the requirements to 

own crab quota shares. 

All requirements and standards for 

halibut and sablefish IFQ and general 

FFP lending guidelines will apply to 

crab IFQ lending, except that the 

ownership limits after closing an FFP 

financing are based on a percentage of 

the total allowable catch not on pounds 

caught. Like halibut sablefish quota 

share, borrowers refinancing existing 

debt cannot borrow more than the 

outstanding debt and must meet the 80 

percent maximum loan amount. 

Summary and Explanation of Proposed 

Regulatory Changes 

In addition to redesigning the current 

regulations, this proposed action makes 

the following changes, as explained 

here. 

General Definitions (§ 253.10) 

This action changes the general 

definitions section of part 253 to reflect 

changes in statutory codification and 

other minor details. Specifically, this 

action eliminates the word ‘‘guarantor’’ 

from the definitions of ‘‘Guaranteed 

Note’’ and ‘‘U.S. Note’’ to clarify that the 

United States is no longer providing 

loan guarantees through the FFP. In all 

other respects the substantive 

definitions of those two terms remain 

the same. Similarly, the terms 

‘‘Applicant,’’ ‘‘Application,’’ 

‘‘Application fee,’’ ‘‘Demand,’’ ‘‘Fish,’’ 

‘‘Guarantee,’’ ‘‘Security documents,’’ are 

changed to reflect the Program’s current 

status as a direct lender possessing a 

legacy portfolio of loan guarantees. The 

definitions of the terms, ‘‘Facility,’’ 

‘‘Guarantee fee,’’ ‘‘Noteholder,’’ 

‘‘Refinancing,’’ ‘‘Refinancing/assumption 

fee,’’ ‘‘U.S.,’’ ‘‘Useful life,’’ and ‘‘Vessel’’ 

remain unchanged from the current 

regulation. 

Additionally, the definitions for the 

following terms were changed to reflect 

the recent recodification of the Shipping 

Statutes. The definition of ‘‘Act’’ was 

changed from Title XI of the Merchant 

Marine Act, 1936, as amended to 

Chapter 537 of title 46 of the U.S. Code, 

(46 U.S.C. 53701–35), as may be 

amended from time to time. The 

definition of ‘‘Actual cost’’ was changed 

from a calculation to a broader 

definition that refers to § 253.16 of the 

rule for specific calculations. The 

definition of ‘‘Aquaculture facility’’ was 

changed to delete from its definition the 

need for its operation to involve 

commercial purposes. The definition of 

‘‘CCF’’ was expanded to include a 

citation and the purpose of a CCF 

account. The definition of ‘‘Citizen’’ was 

changed to update the citation for 

citizenship qualification. The term 

‘‘Contributory project’’ has been deleted, 

and its provisions are contained in the 

revised definition of ‘‘Project.’’ The 

terms ‘‘Property’’ and ‘‘Project Property’’ 

have been deleted as superfluous. The 

definition of ‘‘Program’’ reflects the 

change in the name of the Program, from 

‘‘Fisheries Obligation Guarantee 

Program’’ to ‘‘Fisheries Finance 

Program’’ and provides additional detail 

on where the Program is located. A 

definition for the term ‘‘RAM’’ is added 

to identify the NMFS Alaska Region’s 

Restricted Access Management division 

or other appropriate authority. 

The following terms are new or carry 

expanded definitions: ‘‘Approval in 

principle letter’’ is added to describe the 

document by which the Program advises 

an applicant that its loan application 

has been approved. ‘‘Captain’’ is added 

to provide clarity to a type of borrower 

authorized to be a crab IFQ applicant. 

‘‘Charter fishing’’ replaces the term 

‘‘Passenger fishing’’ for consistency with 

the MSA. ‘‘Crewman’’ is added to 

describe an individual qualified to 

apply for IFQ financing. ‘‘Fisheries 

harvest authorization’’ is defined to 

provide clarity for its use with the IFQ 

loan programs. ‘‘Fishery facility’’ is 

changed to clarify that facilities 

servicing water craft used for charter 

fishing are included within this 

definition. ‘‘Fishing’’ is expanded to 

match the MSA, as amended definition, 

thereby providing additional clarity and 

specifically excluding scientific 

research activity. ‘‘IFQ’’ is added to 

reflect its use in the halibut/sablefish 

and crab IFQ loan programs. ‘‘Obligor,’’ 

which corresponds to the previous term 

‘‘Notemaker’’ used in the existing 

regulations, is added to match the term 

used in the Act. ‘‘Origination year’’ is 

added to define how the term will be 

applied to qualify applicants for IFQ 

financing. The definition of ‘‘Project’’ 

has been expanded to improve 

readability and interpretation of the 

proposed regulation. The terms 

‘‘Underutilized fishery’’ and ‘‘Wise use’’ 

are changed to bring them in line with 

current NMFS standards. 

Except for renumbering and 

reordering, the contents of new 

§§ 253.11, 253.12 and 253.13 (relating to 

General FFP Credit Standards and 

Requirements, Credit Application 

Requirements, and the Initial 

Investigation and Approval) remain 

largely unchanged from § 253.11 and 

§§ 253.13–16 in the current regulations. 

The sections track the discussion of the 

Program’s lending policies described 

above. 

Loan Documents (§ 253.14) 

This action also adds a new § 253.14, 

the provisions of which largely reflect 

those of the current § 253.12. Section 

253.14 eliminates the distinction in the 

rule between a ‘‘guaranteed note,’’ which 

was defined by the 1996 regulations as 

a note sold to a third party and a ‘‘U.S. 

Note,’’ defined as a document presented 

to the FFP in order to allow the FFP to 

properly file various liens and security 

interests. Since the statute was amended 

in October 1996 to create the direct loan 

program, these terms are no longer 

distinct, and this change is necessary to 

codify the statutory determination that 

the FFP is issued only a single note, 

while the debt is held by the United 

States. 

For Program loans originating before 

October 11, 1996, the term ‘‘U.S. Note’’ 

applies to the additional note executed 

by the borrower. However, for loans 


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originating after October 11, 1996, ‘‘U.S. 

Note’’ refers to the promissory note 

given to the FFP that evidences the 

borrower’s actual indebtedness to the 

U.S. Keeping with current practice, U.S. 

Notes are assignable, allowing the FFP 

to sell notes to a third party. This 

provides the Program an additional 

opportunity to liquidate a defaulted 

debt. 

This rule also clarifies that, during the 

life of a loan, the FFP may advance 

sums to protect its collateral or security 

interests. For example, the FFP may 

elect to pay for insurance premiums on 

collateral property when the borrower 

has failed to do so. This section 

establishes that any sums advanced by 

the FFP will be added to the 

outstanding loan principal, and incur 

interest as described by the terms of 

such additional lending. 

In addition to describing the U.S. 

Note, § 253.14 sets forth certain 

requirements for the Program’s security 

documents. While the Program may 

entertain suggested amendments from 

borrowers and their legal counsel, the 

FFP retains final authority over the 

contents of the security documents. 

Under its lending policy, the FFP 

finances specific projects, taking the 

actual property associated with such 

projects as collateral for the loan. 

However, to meet its credit risk 

standards, the Program frequently seeks 

security interests in assets beyond the 

property that is the nominal subject of 

the financing. The FFP may require 

security interests in other assets owned 

by the applicant, affiliated businesses, 

and the applicant’s owners. In unusual 

circumstances, the Program may 

consider other substitute collateral of 

equal or greater value. The Program will 

make this determination on a case-bycase basis. 

Recourse Against Other Parties 

(§ 253.15) 

This proposed action also creates 

§ 253.14, which provides that any 

personal or business guarantees and 

additional security required by the 

Program may be secured or unsecured, 

and may take the form of a repayment 

guaranty or an irrevocable letter of 

credit. As a general policy, the FFP will 

hold those who stand to receive the 

primary benefit of the project financially 

accountable for the project’s 

performance. For instance, the FFP may 

require recourse against a borrower’s 

major shareholders, parent corporation, 

affiliated businesses, general partners, 

limited partners, the spouses of 

borrowers who reside in community 

property states, and any other person or 

entity with a financial interest in the 

borrower. In the event that additional 

security is unavailable, the value of 

assets pledged to the U.S. must be 

deemed sufficient to liquidate the loan. 

Actual Cost (§ 253.16) 

This action adds a new section 

§ 253.16, to provide detail and clarity 

for the term ‘‘Actual cost.’’ Lending for 

shoreside facilities, aquaculture 

facilities and IFQ each require different 

calculations of actual cost of the project 

to be financed. As it applies to a vessel, 

this provision would allow actual cost 

to be calculated on a ‘‘cost basis,’’ 

meaning that the original cost of a vessel 

and its capital improvements are 

depreciated over their useful life. This 

change is necessary to allow the FFP to 

account for value added of the 

depreciated actual cost, which is the 

basis of the maximum loan amount by 

limited access permits or other harvest 

privileges that are appurtenant to the 

vessel such as, for example, those that 

are assigned to a vessel, tracked by 

vessel, or accrue because of vessel 

ownership. Section 253.106 will 

provide that the actual cost of a vessel 

can reflect the value of an appurtenant 

harvest privilege, even though there 

may be no cost basis for the appurtenant 

privilege. The provision clarifies that 

such harvest privileges may only be 

included if they are used aboard or by 

the vessel that is the subject of the loan 

and that the privileges, themselves, also 

serve as additional primary collateral for 

the loan. All other aspects of vessel 

actual cost are unchanged from the 

existing rule. 

This provision clarifies that the FFP 

will use two different actual cost 

computations to determine the cost 

basis for loans under the Program. For 

real property owned in fee simple by the 

borrower, the FFP will value the land 

according to its current market value. 

Valuing land on a cost basis is difficult 

because land does not incur ongoing 

acquisition costs. Moreover, the value of 

real property can fluctuate over time, 

and cost basis may not reflect the 

change in value, if any. For example, a 

land owner, who purchased land 20 

years ago, may be unable to borrow 

against the land’s current market value 

if actual cost was measured using cost 

basis. Using current market value allows 

older facilities to obtain a loan that is 

reasonably proportionate to the facility’s 

contemporary value. 

In contrast, the FFP will calculate the 

actual cost for improvements to real 

property on a cost basis. Cost basis takes 

the original cost of assets, and 

depreciates them over their estimated 

useful life, to determine the present 

value of the assets. The values of 

improvements to shoreside and 

aquaculture facilities are best 

determined by their cost and their 

expected lifetime. Equipment and 

fixtures are often unique to these 

facilities and are not usable elsewhere, 

so, alternative methods of evaluation are 

not readily available. 

The FFP will also use cost basis to 

determine the actual cost of a real 

property lease. Although a lease is a 

capital asset, it is of finite duration and 

requires that the tenant continually pay 

rent. A lease’s actual cost is defined as 

the net present value of the future 

stream of rent payments, with the 

present value calculated at the time the 

borrower submits its loan application. 

The FFP will use the United States 

Department of Treasury Daily Treasury 

Yield Curve Rate to determine the 

discount rate. To include a lease among 

collateral, the project property must be 

located on the leased land and the 

duration of the lease must exceed both 

the nominal term of the financing and 

any additional period that the FFP 

deems appropriate. 

The FFP will also finance and 

refinance transferable limited entry 

privileges. Often these privileges are 

bought and sold in arm’s length 

transactions, such that an identifiable 

market already exists for them. The FFP 

will define the actual cost of 

transferable limited access privileges in 

two ways, based on their market value. 

When first purchased, these rules define 

actual cost as current market value, as 

set by purchase price. As with the sale 

of any good, the value that a buyer and 

seller agree to is generally the best 

determination of market value. 

In the context of refinancing limited 

entry privileges, these rules define 

actual cost as the current market value 

of similar privileges. Although the value 

of these privileges may change over 

time, the existence of an identifiable 

market allows the FFP to use 

contemporaneous comparable sales to 

determine current market value. 

Additionally, new §§ 253.28(d)(2) and 

253.30(c)(2) limit the aggregate value of 

a borrower’s refinancing transactions. 

The value of a refinancing loan can not 

exceed the amount required to fully 

repay the QS debt being refinanced. 

Insurance (§ 253.17) 

Section 253.17 replaces the old 

§ 253.15(c), and sets out new provisions 

for the FFP’s review and approval of 

insurance coverage. Currently, the FFP 

requires each borrower to have and 

maintain adequate insurance coverage. 

Typically, the FFP requires borrowers to 

have general business coverage, 

including (but not limited to) worker’s 


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compensation, seaman’s liability, 

business interruption, inventory 

coverage, cargo coverage, breach of 

warranty, as well as other insurance 

specific to a loan’s collateral package. At 

a minimum, the current rules provide 

that the United States must be named as 

the loss payee, where applicable, and 

coverage must provide protection from 

any partial or total loss of collateral. 

Additionally, the current rules require 

that the Program be named an 

additional assured or co-policyholder, 

rather than just as a loss payee. The FFP 

also requires that vessel coverage 

policies attest to the vessel’s 

seaworthiness. In order to provide 

coverage in the event a policy term or 

condition is violated, current FFP rules 

require that borrowers provide 

additional coverage to protect against 

breaches of warranty. Although the 

Program requires certain provisions and 

covenants within all policies, the FFP 

retains broad discretion to tailor its 

insurance requirements to fit the 

circumstances of each individual loan. 

Under the proposed action, the FFP 

will be required to find both the insurer 

and the amount of coverage to be 

acceptable. The Program will use 

various insurance rating services to 

evaluate insurers, and reserves the right 

to refuse coverage from unapproved 

insurers. All required insurance 

coverage must be maintained 

continuously during the life of the loan. 

A break in coverage is a security default 

and grounds for foreclosure. While the 

FFP recognizes that insurers often 

maintain the right to cancel insurance 

coverage for a variety of reasons, the 

new Program rules require that 

insurance policies provide for a 

minimum of 20 days advance written 

notice to the FFP and the insured of 

cancellation for vessels, and 30 days of 

advance written notice for facilities. 

Closing (§ 253.18) 

The proposed rule redesignates 

current section § 253.15(g) as § 253.18. 

As in the existing section, the new 

section clarifies that the Program 

approves loans by sending an applicant 

an AIP, which contains the terms and 

conditions required to close the loan 

and disburse the proceeds. The AIP 

must be signed and returned by the 

borrower to show acceptance of the 

terms and conditions; most of these 

terms and conditions are also 

incorporated into the actual closing 

documents. Significant changes to the 

closing documents, which are standard 

forms developed by the Program, 

require the Program’s written approval. 

The FFP may require the borrower’s 

attorney, at the borrower’s expense, to 

draft closing documents for transactions 

involving state or local law. Likewise, 

other closing costs, including title 

search and insurance, escrow fees and 

document preparation shall be at the 

borrower’s expense. 

Finally, the regulations provide that 

neither the United States nor the FFP 

will be liable for any adverse 

consequences related to the timing of 

closing. The Program will only close 

loans when all requirements are 

satisfactorily completed. This section 

encourages the parties to a loan 

transaction to work closely with the 

Program to assure closing on a timely 

basis. 

Dual-use CCF (§ 253.19) 

The Capital Construction Program 

allows fishermen to deposit profits in a 

capital construction fund (CCF) 

earmarked account and defer the taxes 

associated with such profits. This 

section provides that CCF accounts can 

be considered as an asset, and may be 

pledged as collateral for Program 

financings. This section is unchanged, 

except for renumbering, from § 253.12(c) 

of the current regulations, to § 253.19. 

Fees (§ 253.20) 

This rule would redesignate § 253.16 

of the current rule to § 253.20. Aside 

from acknowledging the application fees 

set out in § 253.12(b) of the proposed 

rule, the new § 253.20 relating to 

guarantee fees and refinancing or 

assumption fees of the rule will largely 

remain unchanged from the existing 

§ 253.16. 

Under the guaranteed loan program, 

the Program will still require that each 

borrower pay a fee of one percent per 

year on the average unpaid principal 

balance. This fee is not applicable to 

direct loans. Although the Program does 

not originate any new guaranteed loans, 

the FFP continues to maintain some 

legacy of FOG loans. For such 

guaranteed loans, this section indicates 

that the first year’s guarantee fee was 

due when the loan closed. However, 

this new section requires that each 

subsequent year’s fee on current 

guaranteed loans is due in advance of 

each year, and is based on the 

scheduled repayments for the coming 

year. Subsequent year annual fees will 

continue to be collected until the 

guaranteed loan is paid in full. Once 

paid, guarantee fees are not refundable; 

accordingly, paying off a guarantee loan 

during the fee year will not result in a 

credit or refund. 

The refinancing and assumption fees 

addressed in this section apply only 

when borrowers refinance or assume 

loans already in the Program’s portfolio. 

It does not apply when the FFP 

refinances loans held by other lenders. 

Instead, a standard application fee is 

due upon submission of the application 

for refinancing such ‘‘outside’’ financing. 

Internal refinancing or assumption fees 

are not refundable, though the FFP may 

choose to waive such fees if the primary 

purpose of the refinancing is to protect 

the interest of the United States. 

All fees mentioned in this section are 

sent to the FFP’s lock box address. The 

mailing address for the lock box is 

currently: U.S. Department of 

Commerce, NOAA, P.O. Box 979008, St. 

Louis, MO 63197–9008. 

The FFP requires that the borrower 

include the loan number on such 

payments. 

Demand by Guaranteed Noteholder and 

Payment (§ 253.21) 

As mentioned above, the Program has 

retained, and will continue to do so, a 

portfolio of guaranteed loans. The 

holders of these debts possess a 

repayment guarantee. In the event of 

payment default, the holder of the note 

makes a ‘‘demand’’ for payment to the 

U.S. This new section, drawn from 

previous § 253.17 of the regulations, 

prescribes that such demand must be 

made in writing and include a complete 

payment history for the loan on which 

demand is made. 

Program Operating Guidelines 

(§ 253.22) 

This new section will authorize the 

FFP to issue non-regulatory policy and 

administrative guidelines, as needed. In 

the evolving arena of fisheries and 

fisheries management, the Program may 

have to adjust its operations to stay 

current and effectively administer the 

Program. 

Default and Liquidation (§ 253.23) 

Under 46 U.S.C. 53722, there are a 

wide variety of actions available to the 

Program if a loan defaults. Program 

officials will work with its attorneys and 

the U.S. Department of Justice, as 

appropriate, to determine a course of 

action. This new section reaffirms the 

Program’s broad authority to use any 

means available to the Federal 

Government to recover debt owed to the 

United States. 

Enforcement Violations and Adverse 

Actions (§ 253.24) 

The FFP believes that it is 

inconsistent with wise and good use of 

the Program funds, and contrary to the 

public interest, to provide financing to 

parties with unresolved fisheries 

enforcement violations. Thus, under 

this new provision, Program borrowers 


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could face a security default and 

foreclosure if they incur a fisheries 

violation. This action provides that the 

Program may delay the approval, 

closing or disbursement of loans to 

parties who have an outstanding Notice 

of Violation and Assessment issued to 

them by NMFS enforcement or other 

authorities. The Program will suspend, 

cancel or rescind the processing of any 

application or disbursement if it 

discovers an unresolved final and 

unappealable sanction. 

In addition, this section provides that 

the FFP will not approve, close or 

disburse a loan unless such fine or 

penalty has (1) been fully resolved; or 

(2) the parties have entered into an 

agreement to pay the penalty in 

installments, and all payments due 

under such installment agreement are 

current. Any failure to resolve such 

penalties could result in 

disqualification. This policy was 

originally announced in a notice 

published in the Federal Register on 

January 4, 1984 (49 FR 491). 

Other Administrative Requirements 

(§ 253.25) 

This action reaffirms that borrowers 

must comply with all applicable Federal 

statutory and administrative 

requirements. Some of these provisions 

include compliance with the Debt 

Collection Act, providing various 

certifications under 15 CFR part 26 

(Nonprocurement Debarment and 

Suspension, Anti-Lobbying, Drug free 

work place, etc.), and the Paperwork 

Reduction Act (PRA). This section also 

clarifies that all loan applications are 

subject to investigation by the United 

States, and may involve the Department 

of Commerce’s Inspector General, the 

U.S. Department of Justice, and NMFS 

Enforcement. 

Traditional Loans (§ 253.26) 

For clarity, the proposed rule 

compiles existing policies and 

requirements for vessel and facility 

lending into this new section. This 

section establishes an 80 percent actual 

cost financing limit, and retains the 

current maximum loan term of 25 years 

or the useful life of the assets being 

financed, whichever is shorter. 

Consistent with the existing § 253.11 

provisions, § 253.26 provides that the 

FFP will not grant financing for new 

vessel construction or for projects that 

materially increase harvesting capacity. 

This action retains existing provisions 

found at § 253.11, which allow the FFP 

to finance or refinance eligible projects, 

including refinancing the Program’s 

legacy Fisheries Obligation Guarantee 

loans as direct loans. The FFP would be 

allowed to reimburse borrowers who 

have already paid or financed the cost 

of refurbishing or constructing vessels. 

In addition to being found creditworthy, applicants for such 

reimbursements must have the required 

fishing permits and authorities. The FFP 

is required to verify that vessels have 

the proper permits, licenses, quotas, 

entry rights, etc. required to legally 

harvest fish under the appropriate 

fisheries management plan and all 

applicable regulations and law. 

The proposed rule also adds text, in 

compliance with 46 U.S.C. 53706(a)(3), 

that authorizes the FFP to liquidate and 

finance the purchase of collateral that 

the Program acquires, including those 

acquired by accelerating, paying or 

settling debts or obligations, through 

foreclosure, or at judicial sale. 

Financing these assets requires the 

availability and use of loan authority. 

This section also includes provisions 

reflecting changes brought on by the 

recent changes to the MSA, as amended, 

including lending for fisheries 

modernization and to support 

sustainable fisheries efforts. 

IFQ Financing (§ 253.27) 

This new section contains the 

Program’s general policy and 

requirements for establishing IFQ 

lending programs, as authorized by the 

MSA, as amended. The FFP must have 

a request from an FMC to approve and 

implement an IFQ loan Program. 

Requests from an FMC should include 

their suggested definitions of: 

Small vessel; 

Entry-level fishermen; and 

Fishermen who fish from a small vessel. 

Council requests under this provision 

may include any other suggested terms 

or conditions. However, the FFP can 

only incorporate those suggestions that 

the Program determines to be feasible, 

are not excessively burdensome, and are 

not otherwise prohibited by applicable 

law, including FFP rules or operating 

guidelines. 

Although the Program regards the 

harvest privilege as the primary 

collateral in an IFQ loan, it will take 

additional security pledges, as 

necessary, to maintain the priority of the 

FFP’s interest in the IFQ and to reduce 

credit risk, in order to protect the 

interest of the U.S. The FFP prefers 

quarterly payments of principal and 

interest to both reduce the number of 

transactions processed by the agency’s 

accounting office and enhance tracking 

of loan performance. Pursuant to 46 

U.S.C. 53710(a)(3), maximum maturity 

for an IFQ loan is 25 years. 

Halibut Sablefish IFQ Loans (§ 253.28) 

This section codifies existing FFP 

HSQS lending policies and guidance 

from the Halibut and Sablefish Fisheries 

Quota-Share Loan Program (63 FR 

28986, May 27, 1998). 

In addition to the pound limits, 

onboard requirements, and other 

eligibility limitations, all HSQS loans 

would be subject to the Program’s 

general standards and requirements. 

Collateral, guarantee and other 

requirements may be adjusted to match 

each individual credit risk. As with IFQ 

financing generally, under this new 

provision the FFP may refinance 

existing debt associated with HSQS. 

However, the FFP has determined that 

providing a HSQS borrower with funds 

in excess of the borrower’s existing and 

outstanding debt is inconsistent with 

sound fiscal management. Therefore, 

HSQS borrowers seeking to refinance 

debt are subject to the FFP’s 20 percent 

borrower’s equity minimum. 

Under this rule, the FFP will defer to 

the RAM division to determine a 

borrower’s eligibility to hold HSQS. To 

purchase and retain HSQS, the potential 

owner must apply to RAM, meet the 

applicable requirements, and receive 

certification from RAM that they are 

eligible to hold HSQS. This section 

requires that an applicant for financing 

under the HSQS loan program possess 

or be able to obtain such certificate. 

Failure to obtain such certification in a 

timely manner may cause the applicant 

to lose its application processing 

priority. 

CDQ Loans (§ 253.29) 

This proposed rule would add a 

section establishing the CDQ lending 

program. Established by statute in 1998, 

this lending program allows CDQ 

Groups to finance certain fisheries 

related projects in Bering Sea and 

Aleutian Islands. CDQ loans are subject 

to all general FFP standards and 

requirements; collateral, guarantee and 

other requirements may be adjusted in 

accordance to each project’s individual 

credit risk. However, CDQ loans may 

carry maturity terms of 30 years, 5 years 

longer than typical Program lending. 

This section is necessary because, 

although the CDQ program was 

authorized in 1998, there were no 

appropriations until 2006 to implement 

the program. The FFP is poised to move 

forward with the program and needs the 

implementing regulations to proceed. 

Crab IFQ Loans (§ 253.30) 

This new section provides regulatory 

provisions specific to the crab IFQ loan 

program. Although crab IFQ loans will 


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be very similar to HSQS loans, the NP 

Council has limited participant 

eligibility to crab captains or crewmen 

on BSAI crab fishing vessels. This 

section contains additional terms that 

codify the NP Council’s intent. It 

provides that captains and crew must be 

certified by RAM as eligible to hold crab 

quota share, and meet all other 

applicable provisions of the Crab FMP 

in effect at the time of their loan closing. 

Like other FFP loan requirements, the 

section limits loan amounts to 80 

percent of the purchase price, as 

required by statute. 

This section also limits refinancing to 

persons whose initial purchase of Crab 

QS would, in accordance with the 

program’s statutory authority, have been 

eligible for FFP financing. Like HSQS 

loans, the Program will only finance up 

to 80 percent of the quota share’s 

current value, and it will limit the 

amount refinanced to the amount 

required to fully repay the outstanding 

debt being refinanced. In addition to 

requiring that such persons meet all 

other Program lending and Crab FMP 

requirements in effect at the time of the 

refinancing, the applicant must have 

established equity in the collateral used 

to support the loan. If they fail to have 

the requisite equity margin (measured as 

the difference between the value of the 

primary collateral and the amount of the 

loan), applicants seeking refinancing 

will be required to pay the debt down 

to the acceptable 80 percent level. 

In order to increase the safety and 

practicality of the lending program, the 

NP Council recommended that ‘‘small 

vessels’’ be defined as all vessels in the 

BSAI crab fisheries. They also expanded 

the qualifications for RAM 

determinations of eligibility to include 

applicants who have made at least one 

delivery in a fishery subject to the crab 

rationalization program in two of the 

three years prior to the application for 

the crab quota share loan. Unlike with 

HSQS, for which participation in the 

loan program is restricted by an IFQ 

pound limit, the NP Council 

recommended that ownership 

limitations in the Crab IFQ lending 

program be based on a percentage of the 

initial quota share pool for each crab 

fishery. This section includes each of 

these modifications. 

Classification 

This proposed rule is published under 

the authority of, and is consistent with, 

Chapter 537 of the Shipping Act and the 

MSA, as amended. The NMFS Assistant 

Administrator has determined that this 

proposed rule is consistent with the 

MSA, as amended, and other applicable 

law, subject to further consideration 

after public comment. 

Executive Order 12866 

This proposed rule has been 

determined to be not significant for 

purposes of Executive Order 12866. 

This rule does not duplicate, overlap, 

or conflict with any other relevant 

Federal rules. 

Paperwork Reduction Act 

Notwithstanding any other provision 

of the law, no person is required to 

respond to, and no person shall be 

subject to penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB Control Number. 

This proposed rule contains 

collections-of-information subject to the 

PRA, which have been approved by 

OMB under control number. The 

application requirements contained in 

these rules have been approved under 

OMB control number 0648–0012. The 

applications for the halibut/sablefish 

quota share crew member eligibility 

certificate have been approved under 

OMB control number 0648–0272. Public 

reporting burden for placing an 

application for FFP financing is 

estimated to average eight hours per 

response, including the time for 

reviewing instructions, searching 

existing data sources, gathering and 

maintaining the data needed, and 

completing and reviewing the collection 

of information. 

Send comments regarding this burden 

estimate, or any other aspect of this data 

collection, including suggestions for 

reducing the burden, to NMFS (see 

ADDRESSES) and by e-mail to 

david.rostker@omb.eop.gov or fax to 

(202) 395–7285. 

Regulatory Flexibility Act 

The Chief Counsel for Regulation of 

the Department of Commerce has 

certified to the Chief Counsel for 

Advocacy of the Small Business 

Administration (SBA) that this proposed 

rule, if adopted, would not have a 

significant economic impact on a 

substantial number of small entities. 

The Regulatory Flexibility Act (RFA), 

5 U.S.C. 601, et seq., requires that, 

‘‘[w]henever an agency is required by 

section 553 of this title [5 USCS § 553], 

or any other law, to publish general 

notice of proposed rulemaking for any 

proposed rule, or publishes a notice of 

proposed rulemaking for an 

interpretative rule involving the internal 

revenue laws of the United States, the 

agency shall prepare and make available 

for public comment an initial regulatory 

flexibility analysis. Such analysis shall 

describe the impact of the proposed rule 

on small entities.’’ 5 U.S.C. 603(a). 

However, where an agency can certify 

‘‘that the rule will not, if promulgated, 

have a significant economic impact on 

a substantial number of small entities’’ 

then an agency need not undertake a 

full regulatory flexibility analysis. 5 

U.S.C. 605(b). 

The proposed rule replaces the 

current FFP rule, subpart B of 50 CFR 

253, as published in the Federal 

Register on May 1, 1996 (61 FR 19172). 

The objective of this rule is to update 

the FFP rule to reflect statutory changes 

and codify all the existing FFP 

authorities into 50 CFR part 253 in the 

Code of Federal Regulations. As 

codified in this rule, the FFP will offer 

small businesses in Alaska and native 

Alaskan communities a source of longterm capital for various segments of the 

commercial fishing and aquaculture 

industries. Participation in the FFP is 

entirely voluntary. This rule imposes no 

mandatory requirements on any 

business. These changes are required by 

recent amendments to the Program’s 

authorizing statutes. Additionally, 

promulgation of new regulations is 

necessary to implement the FFP’s new 

lending programs. To gain key 

efficiencies, this proposed rule 

combines these Program operating 

requirements into a single rulemaking. 

Having all aspects of the FFP’s rules 

located in one rule will assist the public 

in reviewing the potential application of 

the FFP to their need. 

Specifically, these rules enact 

regulatory changes to create new FFP 

programs authorized in legislation in 

2006 will be implemented under 50 CFR 

part 253, subpart B. Additionally, this 

rule will create new §§ 253.10 through 

253.30.50. Part 253, subpart C (§§ 253.20 

through 253.24) will be redesigned as 

Subpart C, sections 253.40 through 

253.44, without change. 

The RFA defines a small fishing 

business as one that has an annual 

revenue of $4.0 million or less. 

Additionally, ‘‘small governmental 

jurisdictions’’ are defined as 

governments of cities, counties, towns, 

townships, villages, school districts, or 

special districts with populations of 

fewer than 50,000. As defined in RFA, 

the small entities that this rule may 

affect include, but are not limited to, 

vessel owners, vessel operators, fish 

dealers, individual fishermen, small 

corporations, others engaged in 

commercial and recreational activities 

regulated by NOAA and native Alaskan 

governmental jurisdictions. In addition, 

the rule would affect some larger 

businesses. Notably, because the FFP is 


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2There were nine records for which NMFS was 

unable to determine the size of the applicant. 

a voluntary program that provides loans 

to qualified applicants, no entities— 

larger or small—would be directly 

regulated by this rule. 

NMFS has examined the business size 

status of applicants approved by the 

FFP during the last eleven years during 

which the FFP has been a direct lender. 

During this period, the FFP approved 

425 applications. Of these applications, 

146, or 35 percent of the total number 

of businesses that could be determined 

to be small or large entities, were small 

businesses as defined by the SBA.2 In 

addition, 221 applicants, or 53 percent 

of all applicants, were individual or sole 

proprietorships. Thus, most of the loans 

that have been recently issued by the 

FFP were to small entities. 

The FFP approved loans for: 

Number Percentage 

Individuals/sole 

proprietorships 221 53 

Small Business 146 35 

Large Business 49 12 

Since it codifies existing FFP statutes 

and policies, this action will not create 

new reporting requirements for small 

entities participating in the FFP. 

Although the FFP requires certain 

supporting documentation during the 

life of a loan, the FFP’s requirements do 

not impose unusual burdens when 

compared to the burdens imposed by 

other lenders. Moreover, because the 

basic need for financing would continue 

to exist without the FFP, the small 

entities seeking financing would still 

need to comply with similar, if not 

identical, requirements imposed by 

another lender. Records required to 

participate in the FFP are usually within 

the normal business records already 

maintained by small business entities. 

The time required for small entities to 

meet these requirements would be less 

that five hours per application. 

In addition, to ease burdens on loan 

applicants that are small entities, the 

proposed rules vary the scope of the 

requested information in accordance 

with the size and complexity of the 

applicant’s operation. These rules 

request information from applicants that 

is already available to them, such as 

income tax returns, insurance policies, 

permits, licenses, etc. Depending on 

circumstances, the FFP may require 

other supporting documents, including 

internal financial statements, audited 

financial statements, property 

descriptions, and other documents that 

can be acquired at reasonable cost if 

they are not already available. 

The FFP has only positive impacts on 

small entities. It is a source of long-term 

capital and imposes no regulatory 

requirements on small business outside 

of those applying for financing. FFP 

applicants make a voluntary decision to 

use the Program. Both small and large 

entities benefit from the availability of 

long-term, fixed rate financing. CDQ 

groups and communities benefit from 

the positive economic opportunities that 

FFP lending provides. 

Because participation is voluntary 

and requires considerable effort and the 

outlay of an application fee, all FFP 

applicants are assumed to have made a 

determination that using FFP financing 

incurs a benefit, such that the FFP’s 

long-term, fixed rate financing provides 

a positive economic impact. 

Importantly, the FFP does not regulate 

or manage the affairs of its borrowers, 

and the regulations impose no 

additional compliance, operating or 

other fees or costs on small entities. 

Because this regulation will impose 

no significant costs on any small 

entities, but rather will provide small 

and large entities with benefits, the 

economic impact on small entities, if 

any, is expected to be minimal at worst, 

but likely it will be positive. 

Accordingly, this rule will not 

substantially impact a significant 

number of small businesses. 

As a result of this certification, an 

initial regulatory flexibility analysis is 

not required and none has been 

prepared. 

List of Subjects in 50 CFR Part 253 

Aquaculture, Community 

development groups, Direct lending, 

Financial assistance, Fisheries, Fishing, 

Individual fishing quota. 

Dated: April 26, 2010. 

Samuel D. Rauch III, 

Deputy Assistant Administrator for 

Regulatory Services, National Marine 

Fisheries Service. 

For the reasons set forth in the 

preamble, 50 CFR part 253 is proposed 

to be amended by revising part 253 as 

follows: 

PART 253B–FISHERIES ASSISTANCE 

PROGRAMS 

Subpart A—General 

Sec. 

253.1 Purpose 

Subpart B—Fisheries Finance Program 

253.10 General definitions. 

253.11 General FFP credit standards and 

requirements. 

253.12 Credit application. 

253.13 Initial investigation and approval. 

253.14 Loan documents. 

253.15 Recourse against other parties. 

253.16 Actual cost. 

253.17 Insurance. 

253.18 Closing. 

253.19 Dual-use CCF. 

253.20 Fees. 

253.21 Demand by guaranteed noteholder 

and payment. 

253.22 Program operating guidelines. 

253.23 Default and liquidation. 

253.24 Enforcement violations and adverse 

actions. 

253.25 Other administrative requirements. 

253.26 Traditional loans. 

253.27 IFQ financing. 

253.28 Halibut sablefish IFQ loans. 

253.29 CDQ loans. 

253.30 Crab IFQ loans. 

253.31–253.49 [Reserved] 

Subpart C—Interjurisdictional Fisheries 

253.50 Definitions. 

253.51 Apportionment. 

253.52 State projects. 

253.53 Other funds. 

253.54 Administrative requirements. 

Authority: 46 U.S.C. 53701 and 16 U.S.C. 

4101 et seq. 

Subpart A—General 

§ 253.1 Purpose. 

(a) The regulations in this part pertain 

to fisheries assistance programs. Subpart 

B of these rules governs the Fisheries 

Finance Program (FFP or the Program), 

which makes capacity neutral long-term 

direct fisheries and aquaculture loans. 

The FFP does all credit investigations, 

makes all credit determinations and 

holds and services all credit collateral. 

(b) Subpart C implements Title III of 

Public Law 99–659 (16 U.S.C. 4100 et 

seq.), which has two objectives: 

(1) Promote and encourage State 

activities in support of the management 

of interjurisdictional fishery resources 

identified in interstate or Federal fishery 

management plans; and 

(2) Promote and encourage 

management of interjurisdictional 

fishery resources throughout their range. 

(c) The scope of this part includes 

guidance on making financial assistance 

awards to States or Interstate 

Commissions to undertake projects in 

support of management of 

injurisdictional fishery resources in 

both the executive economic zone (EEZ) 

and State waters, and to encourage 

States to enter into enforcement 

agreements with either the Department 

of Commerce or the Department of the 

Interior. 

Subpart B—Fisheries Finance Program 

§ 253.10 General definitions. 

The terms used in this subpart have 

the following meanings: 

Act means Chapter 537 of Title 46 of 

the U.S. Code, (46 U.S.C. 53701–35), as 

may be amended from time to time. 


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Actual cost means the sum of all 

amounts for a project paid by an obligor 

(or related person), as well as all 

amounts that the Program determines 

the obligor will become obligated to 

pay, as such amounts are calculated by 

§ 253.16. 

Applicant means the individual or 

entity applying for a loan (the 

prospective obligor). 

Application means the documents 

provided to or requested by NMFS from 

an applicant to apply for a loan. 

Application fee means 0.5 percent of 

the dollar amount of financing 

requested. 

Approval in principle letter (AIP) 

means a written communication from 

NMFS to the applicant expressing the 

agency’s commitment to provide 

financing for a project, subject to all 

applicable regulatory and Program 

requirements and in accordance with 

the terms and conditions contained in 

the AIP. 

Aquaculture facility means land, 

structures, appurtenances, laboratories, 

water craft built in the U.S., and any 

equipment used for the hatching, caring 

for, or growing fish under controlled 

circumstances for commercial purposes, 

as well as the unloading, receiving, 

holding, processing, or distribution of 

such fish. 

Captain means a vessel operator or a 

vessel master. 

Capital Construction Fund (CCF), as 

described under 46 U.S.C. 53501–17, 

allows owners of eligible vessels to 

reserve capital for replacement vessels, 

additional vessels, reconstruction of 

vessels, or reconstructed vessels, built 

in the United States and documented 

under the laws of the United States, for 

operation in the fisheries of the United 

States. 

Charter fishing means fishing from a 

vessel carrying a ‘‘passenger for hire,’’ as 

defined in 46 U.S.C. 2101(21a), such 

passenger being engaged in recreational 

fishing, from whom consideration is 

contributed as a condition of carriage on 

the vessel, whether directly or indirectly 

flowing to the owner, charterer, 

operator, agent, or any other person 

having an interest in the vessel. 

Citizen means a ‘‘citizen of the United 

States,’’ as described in 46 U.S.C. 104, or 

an entity who is a citizen for the 

purpose of documenting a vessel in the 

coastwise trade under 46 U.S.C. 50501. 

Crewman means any individual, other 

than a captain, a passenger for hire, or 

a fisheries observer working on a vessel 

that is engaged in fishing. 

Demand means a noteholder’s request 

that a debtor or guarantor pay a note’s 

full principal and interest balance. 

Facility means a fishery or an 

aquaculture facility. 

Fish means finfish, mollusks, 

crustaceans and all other forms of 

aquatic animal and plant life, other than 

marine mammals and birds. 

Fisheries harvest authorization means 

any transferable permit, license or other 

right, approval, or privilege to engage in 

fishing. 

Fishery facility means land, land 

structures, water craft that do not engage 

in fishing, and equipment used for 

transporting, unloading, receiving, 

holding, processing, preserving, or 

distributing fish for commercial 

purposes (including any water craft 

used for charter fishing). 

Fishing means: 

(1) The catching, taking, or harvesting 

of fish; 

(2) The attempted catching, taking, or 

harvesting of fish; 

(3) Any other activity which can 

reasonably be expected to result in the 

catching, taking, or harvesting of fish; 

(4) Any operations at sea in support 

of, or in preparation for, any activity 

described in (1) through (3) above. 

(5) Fishing does not include any 

scientific research activity which is 

conduced by a scientific research vessel. 

Fishing industry for the purposes of 

this part, means the broad sector of the 

national economy comprised of persons 

or entities that are engaged in or 

substantially associated with fishing, 

including aquaculture, charter 

operators, guides, harvesters, outfitters, 

processors, suppliers, among others, 

without regard to the location of their 

activity or whether they are engaged in 

fishing for wild stocks or aquaculture. 

Guarantee means a guarantor’s 

contractual promise to repay 

indebtedness if an obligor fails to repay 

as agreed. 

Guarantee fee means one percent of a 

guaranteed note’s average annual 

unpaid principal balance. 

Guaranteed note means a promissory 

note from an obligor to a noteholder, the 

repayment of which the United States 

guarantees. 

IFQ means Individual Fishing Quota, 

which is a Federal permit under a 

limited access system to harvest a 

quantity of fish, expressed by a unit or 

units representing a percentage of the 

total allowable catch of a fishery that 

may be received or held for exclusive 

use by a person. IFQ does not include 

community development quotas. 

Noteholder means a guaranteed note 

payee. 

Obligor means a party primarily liable 

for payment of the principal of or 

interest on an obligation, used 

interchangeably with the terms ‘‘note 

payor’’ or ‘‘notemaker.’’ 

Origination year means the year in 

which an application for a loan is 

accepted for processing. 

Program means the Fisheries Finance 

Program, Financial Services Division, 

National Marine Fisheries Service, 

National Oceanic and Atmospheric 

Administration, U.S. Department of 

Commerce. 

Project means: 

(1) The refinancing of construction of 

a new fishing vessel or the financing or 

refinancing of a fishery or aquaculture 

facility or the refurbishing or purchase 

of an existing vessel or facility, 

including, but not limited to, 

architectural, engineering, inspection, 

delivery, outfitting, and interest costs, as 

well as the cost of any consulting 

contract the Program requires; 

(2) The purchase or refinance of any 

limited access privilege, IFQ, fisheries 

access right, permit, or other fisheries 

harvest authorization, for which the 

actual cost of the purchase of such 

authorization would be eligible under 

the Act for direct loans; 

(3) Activities (other than fishing 

capacity reduction, as set forth in part 

600.1000 of this title) that assist in the 

transition to reduced fishing capacity; 

(4) Technologies or upgrades designed 

to improve collection and reporting of 

fisherydependent data, to reduce 

bycatch, to improve selectivity or 

reduce adverse impacts of fishing gear, 

or to improve safety; or 

(5) Any other activity that helps 

develop the U.S. fishing industry, 

including, but not limited to, measures 

designed or intended to improve a 

vessel’s fuel efficiency, to increase 

fisheries exports, to develop an 

underutilized fishery, or to enhance 

financial stability, financial 

performance, growth, productivity, or 

any other business attribute related to 

fishing or fisheries. 

RAM means the Restricted Access 

Management division in the Alaska 

Regional Office of the National Marine 

Fisheries Service or the office that 

undertakes the duties of this division to 

issue or manage quota shares. 

Refinancing means newer debt that 

either replaces older debt or reimburses 

applicants for previous expenditures. 

Refinancing/assumption fee means a 

one time fee assessed on the principal 

amount of an existing FFP note to be 

refinanced or assumed. 

Refurbishing means any 

reconstruction, reconditioning, or other 

improvement of existing vessels or 

facilities, but does not include routine 

repairs or activities characterized as 

maintenance. 

Security documents mean all 

documents related to the collateral 


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securing the U.S. Note’s repayment and 

all other assurances, undertakings, and 

contractual arrangements associated 

with financing or guarantees provided 

by NMFS. 

Underutilized fishery means any stock 

of fish (a) harvested below its optimum 

yield or (b) limited to a level of harvest 

or cultivation below that corresponding 

to optimum yield by the lack of 

aggregate facilities. 

U.S. means the United States of 

America and, for citizenship purposes, 

includes the fifty states, Commonwealth 

of Puerto Rico, American Samoa, the 

Territory of the U.S. Virgin Islands, 

Guam, the Republic of the Marshall 

Islands, the Federated States of 

Micronesia, the Commonwealth of the 

Northern Mariana Islands, and any other 

commonwealth, territory, or possession 

of the United States, or any political 

subdivision of any of them. 

U.S. Note means a promissory note 

payable by the obligor to the United 

States. 

Useful life means the period during 

which project property will, as 

determined by the Program, remain 

economically productive. 

Vessel means any vessel documented 

under U.S. law and used for fishing. 

Wise use means the development, 

advancement, management, 

conservation, and protection of fishery 

resources, that is not inconsistent with 

the National Standards for Fishery 

Conservation and Management (16 

U.S.C. 1851) and any other relevant 

criteria, as may be specified in 

applicable statutes, regulations, Fishery 

Management Plans, or NMFS guidance. 

§ 253.11 General FFP credit standards and 

requirements. 

(a) Principal. Unless explicitly stated 

otherwise in these regulations or 

applicable statutes, the amount of any 

loan may not exceed 80 percent of 

actual cost, as such term is described in 

§ 253.16; provided that, the Program 

may approve an amount that is less, in 

accordance with its credit 

determination. 

(b) Interest rate. Each loan’s annual 

interest rate will be 2 percent greater 

than the U.S. Department of Treasury’s 

cost of borrowing public funds of an 

equivalent maturity at the time the loan 

closes. 

(c) Ability and experience 

requirements. An obligor and the 

majority of its principals must 

demonstrate the ability, experience, 

resources, character, reputation, and 

other qualifications the Program deems 

necessary for successfully operating the 

project property and protecting the 

Program’s interest in the project. 

(d) Lending restrictions. Unless it can 

document that unique or extraordinary 

circumstances exist, the Program will 

not provide financing: 

(1) For venture capital purposes; or, 

(2) To an applicant who cannot 

document successful fishing industry 

ability and experience of a duration, 

degree, and nature that the Program 

deems necessary to successfully repay 

the requested loan. 

(e) Income and expense projections. 

The Program, using conservative income 

and expense projections for the project 

property’s operation, must determine 

that projected net earnings can service 

all debt, properly maintain the project 

property, and protect the Program’s 

interest against risks of loss, including 

the industry’s cyclical economics. 

(f) Working capital. The Program must 

determine that a project has sufficient 

initial working capital to achieve net 

earnings projections, fund all 

foreseeable contingencies, and protect 

the Program’s interest in the project. In 

making its determination, the Program 

will use a conservative assessment of an 

applicant’s financial condition, and at 

the Program’s discretion, some portion 

of projected working capital needs may 

be met by something other than current 

assets minus liabilities (i.e., by a line or 

letter of credit, non-current assets 

readily capable of generating working 

capital, a guarantor with sufficient 

financial resources, etc.). 

(g) Audited financial statements. 

Audited financial statements will 

ordinarily be required for any obligor 

with large or financially complex 

operations whose financial condition 

the Program believes cannot be 

otherwise assessed with reasonable 

certainty. 

(h) Consultant services. Expert 

consulting services may be necessary to 

help the Program assess a project’s 

economic, technical, or financial 

feasibility. The Program will notify the 

applicant if an expert is required. The 

Program will select and employ the 

necessary consultant, but require the 

applicant to reimburse the Program for 

any fees charged by the consultant. In 

the event that an application requires 

expert consulting services, the loan will 

not be closed until the applicant fully 

reimburses the Program. This cost may, 

at the Program’s discretion, be included 

in the amount of the note. For a 

declined application, the Program may 

reimburse itself from the application fee 

as described in § 253.12, including any 

portion known as the commitment fee 

that could otherwise be refunded to the 

applicant. 

(i) Property inspections. The Program 

may require adequate condition and 

valuation inspection of all property as 

the basis for assessing the property’s 

worth and suitability for lending. The 

Program may also require these at 

specified periods during the life of the 

loan. These must be conducted by 

competent and impartial inspectors 

acceptable to the Program. Inspection 

cost will be at an applicant’s expense. 

Those occurring before application 

approval may be included in actual cost, 

as actual cost is described in § 253.16. 

(j) First priority. The Program shall 

have first position lien priority on all 

primary project property pledged as 

collateral (or adequate substitute 

collateral), unless the Program, at the 

request of the applicant, expressly 

waives this requirement in writing. 

(k) No additional liens. All primary 

project property pledged as collateral, 

including any adequate substitute 

collateral, shall be free of additional 

liens, unless the Program, at the request 

of the applicant, expressly waives this 

requirement in writing. 

(l) General FFP credit standards 

apply. Unless explicitly stated 

otherwise in these rules, all Fisheries 

Finance Program direct lending is 

subject to the above general credit 

standards and requirements found in 

§§ 253.12–253.30. The Program may 

adjust collateral, guarantee and other 

requirements to reflect individual credit 

risks. 

(m) Adverse legal proceedings. The 

Program, at its own discretion, may 

decline or hold in abeyance any loan 

approval or disbursement(s) to any 

applicant found to have outstanding 

lawsuits, citations, hearings, liabilities, 

appeals, sanctions or other pending 

actions whose negative outcome could 

significantly impact, in the opinion of 

the Program, the financial 

circumstances of the applicant. 

§ 253.12 Credit application. 

(a) Applicant. 

(1) An applicant must be a U.S. 

citizen and be eligible to document a 

vessel in the coastwise trade: and 

(2) Only the legal title holder of 

project property, or its parent company 

(or the lessee of an appropriate longterm lease) may apply for a loan; and 

(3) An applicant and the majority of 

its principals must generally have the 

ability, experience, resources, character, 

reputation, and other qualifications the 

Program deems necessary for 

successfully operating, utilizing, or 

carrying out the project and protecting 

the Program’s interest; and 

(4) Applicants should apply to the 

appropriate NMFS Regional Financial 

Services Branch to be considered. 


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(b) Application fee. An application fee 

of 0.5 percent of the dollar amount of an 

application is due when the application 

is formally accepted. Upon submission, 

50 percent of the application fee, known 

as the ‘‘filing fee,’’ is non-refundable; the 

remainder, known as the ‘‘commitment 

fee,’’ may be refunded if the Program 

declines an application or an applicant 

withdraws its application before the 

Program issues an AIP letter, as 

described in § 253.13(e). The Program 

will not issue an AIP letter if any of the 

application fee remains unpaid. No 

portion of the application fee shall be 

refunded once the Program issues an 

AIP letter. 

(c) False statement. A false statement 

on an application is grounds for denial 

or termination of funds, grounds for 

possible punishment by a fine or 

imprisonment as provided in 18 U.S.C. 

1001 and an event of a security default. 

§ 253.13 Initial investigation and approval. 

(a) The Program shall undertake a due 

diligence investigation of every 

application it receives to determine if, 

in the Program’s sole judgment, the 

application is both: 

(1) Eligible for a loan because it meets 

applicable loan requirements; and 

(2) Qualified for a loan because the 

project is deemed an acceptable credit 

risk. 

(b) The Program will approve eligible 

and qualified applicants by evaluating 

the information obtained during the 

application and investigation process. 

(c) Among other investigations, 

applicants may be subject to a 

background check, fisheries violations 

check and credit review. Background 

checks are intended to reveal if any key 

individuals associated with the 

applicant have been convicted of or are 

presently facing criminal charges such 

as fraud, theft, perjury, or other matters 

which significantly reflect on the 

applicant’s honesty or financial 

integrity. 

(d) The Program, at its own discretion, 

may decline or delay approval of any 

loans or disbursements to any applicant 

found to have outstanding citations, 

notices of violations, or other pending 

legal actions or unresolved claims. 

(e) The Program may place any terms 

and conditions on such approvals that 

the Program, in its sole discretion, 

deems necessary and appropriate. 

(f) Credit decision. 

(1) The Program shall issue an AIP 

letter to approved applicants, which 

shall describe the terms and conditions 

of the loan, including (but not limited 

to) loan amounts, maturities, additional 

collateral, repayment sources or 

guarantees. Such terms and conditions 

are at the Program’s sole discretion and 

shall also be incorporated in security 

documents that the Program prepares. 

An applicant’s non-acceptance of any 

terms and conditions may result in an 

applicant’s disqualification. 

(2) Any application the Program 

deems ineligible or unqualified will be 

declined. 

§ 253.14 Loan documents. 

(a) U.S. Note. 

(1) The U.S. Note will be in the form 

the Program prescribes. 

(2) The U.S. Note evidences the 

obligor’s indebtedness to the United 

States. 

(i) For financing approved after 

October 11, 1996, the U.S. Note 

evidences the obligor’s actual 

indebtedness to the U.S.; and 

(ii) For financing originating before 

October 11, 1996, that continues to be 

associated with a Guaranteed Note, the 

U.S. Note shall evidence the obligor’s 

actual indebtedness to the U.S. upon the 

Program’s payment of any or all of the 

sums due under the Guaranteed Note or 

otherwise disbursed on the obligor’s 

behalf. 

(iii) The U.S. Note will, among other 

things, contain provisions to add to its 

principal balance all amounts the 

Program advances or incurs, including 

additional interest charges and costs 

incurred to protect its interest or 

accommodate the obligor. 

(3) The U.S. Note shall be assignable 

by the Program, at its sole discretion. 

(b) Security documents. 

(1) Each security document will be in 

the form the Program prescribes. 

(2) The Program will, at a minimum, 

require the pledge of adequate 

collateral, generally in the form of a 

security interest or mortgage against all 

property associated with a project or 

security as otherwise required by the 

Program. 

(3) The Program will require such 

other security as it deems necessary and 

appropriate, given the circumstances of 

each obligor and the project. 

(4) The security documents will, 

among other things, contain provisions 

to secure the repayment of all additional 

amounts the Program advances or incurs 

to protect its interest or accommodate 

the obligor, including additional interest 

charges and fees. 

§ 253.15 Recourse against parties. 

(a) Form. Recourse by borrowers or 

guarantors may be by a repayment 

guarantee, irrevocable letter of credit, 

additional tangible or intangible 

collateral, or other form acceptable to 

the Program. 

(b) Principals accountable. The 

principal parties in interest, who 

ultimately stand most to benefit from 

the project, will ordinarily be held 

financially accountable for the project’s 

performance. The Program may require 

recourse against: 

(1) All major shareholders of a 

closely-held corporate obligor; 

(2) The parent corporation of a 

subsidiary corporate obligor; 

(3) The related business entities of the 

obligor if the Program determines that 

the obligor lacks substantial pledged 

assets other than the project property or 

is otherwise lacking in any credit factor 

required to approve the application; 

(4) Any or all major limited partners; 

(5) Non-obligor spouses of applicants 

or obligors in community property 

states; and/or 

(6) Against any others it deems 

necessary to protect its interest. 

(c) Recourse against parties. Should 

the Program determine that a secondary 

means of repayment from other sources 

is necessary (including the net worth of 

parties other than the obligor), the 

Program may require secured or 

unsecured recourse against any such 

secondary repayment sources. 

(d) Recourse unavailable. Where 

appropriate recourse is unavailable, the 

conservatively projected net liquidating 

value of the obligor’s assets (as such 

assets are pledged to the Program) must, 

in the Program’s credit judgment, 

substantially exceed all projected 

Program exposure or other risks of loss. 

§ 253.16 Actual cost. 

Actual cost shall be determined as 

follows: 

(a) The actual cost of a vessel shall be 

the sum of: 

(1) The total cost of the project 

depreciated on a straight-line basis, over 

the project property’s useful life, using 

a 10-percent salvage value; and 

(2) The current market value of 

appurtenant limited access privileges or 

transferable limited access privileges 

vested in the name of the obligor, the 

subject vessel or their owners provided 

that such privileges are utilized by or 

aboard the subject vessel and will be 

pledged as collateral for the subject FFP 

financing. 

(b) The actual cost of a facility shall 

be the sum of: 

(1) The total cost of the project, not 

including land, depreciated on a 

straightline basis over the Project 

Property’s useful life, using a 10-percent 

salvage value; 

(2) The current market value of the 

land that will be pledged as collateral 

for the subject FFP financing, provided 

that such land is utilized by the facility; 

and 

(3) The net present value of the 

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of land or marine use rights, provided 

that they meet the following 

requirements: 

(i) The project property must be 

located at such leased space or directly 

use such marine rights; 

(ii) Such lease or marine use right 

must have a duration the Program 

deems sufficient; and 

(iii) The lease or marine use right 

must be assigned to the Program such 

that the Program may foreclose and 

transfer such lease to another party. 

(c) The actual cost of a transferable 

limited access privilege shall be 

determined as follows: 

(1) For financing the purchase of 

limited access privileges, the actual cost 

shall be the purchase cost. 

(2) For refinancing limited access 

privileges, the actual cost shall be the 

current market value. 

(d) The actual cost of any Project that 

includes any combination of items 

described in subsections (a), (b) or (c) of 

this section shall be the sum of such 

calculations. 

§ 253.17 Insurance. 

(a) All insurable collateral property 

and other risks shall be continuously 

insured so long as any balance of 

principal or interest on a Program loan 

or guarantee remains outstanding. 

(b) Insurers must be acceptable to the 

Program. 

(c) Insurance must be in such forms 

and amounts and against such risks the 

Program deems necessary to protect the 

United States’ interest. 

(d) Insurance must be endorsed to 

include the requirements the Program 

deems necessary and appropriate. 

(1) Normally and as appropriate, the 

Program will be named as an additional 

insured, mortgagee, or loss payee, for 

the amount of its interest; any waiver of 

this requirement must be in writing; 

(2) Cancellation will require adequate 

advance written notice; 

(3) The Program will be adequately 

protected against other insureds’ 

breaches of policy warranties, 

negligence, omission, etc., in the case of 

marine insurance, vessel seaworthiness 

will be required; 

(4) The insured must provide 

coverage for any other risk or casualty 

the Program may require. 

§ 253.18 Closing. 

(a) Approval in principle letters. Every 

closing will be in strict accordance with 

a final approval in principle letter. 

(b) Contracts. Promissory notes, 

security documents, and any other 

documents the Program may require 

will be on standard Program forms that 

may not be altered without Program 

written approval. The Program will 

ordinarily prepare all contracts, except 

certain pledges involving real property 

or other matters involving local law, 

which will be prepared by each 

obligor’s attorney at the direction and 

approval of the Program. 

(c) Additional requirements. At its 

discretion the Program may require 

services from applicant’s attorneys, 

other contractors or agents. Real 

property services required from an 

applicant’s attorney or agent may 

include, but are not limited to: Title 

search, title insurance, mortgage and 

other document preparation, document 

execution and recording, escrow and 

disbursement, and legal opinions and 

other assurances. The Program will 

notify the applicant in advance if any 

such services are required of the 

applicant’s attorneys, contractors or 

other agents. Applicants are responsible 

for all attorney’s fees, as well as those 

of any other private contractor. 

Attorneys and other contractors must be 

satisfactory to the Program. 

(d) Closing schedules. The Program 

will not be liable for adverse interestrate fluctuations, loss of commitments, 

or other consequences of an inability by 

any of the parties to meet the closing 

schedule. 

§ 253.19 Dual-use CCF. 

The Program may require the pledge 

of a CCF account or annual deposits of 

some portion of the project property’s 

net income into a dual-use CCF. A dualuse CCF provides the normal CCF taxdeferral benefits, but also gives the 

Program control of CCF withdrawals, 

recourse against CCF deposits, ensures 

an emergency refurbishing reserve (taxdeferred) for project property, and 

provides additional collateral. 

§ 253.20 Fees. 

(a) Application fee. See §§ 253.10 and 

253.12(b), above. 

(b) Guarantee fee. For existing 

Guaranteed Loans, an annual guarantee 

fee will be due in advance and will be 

based on the guaranteed note’s 

repayment provisions for the 

prospective year. The first annual 

guarantee fee was due at guarantee 

closing. Each subsequent guarantee fee 

is due and payable on the guarantee 

closing’s anniversary date. Each is fully 

earned when due, and shall not 

subsequently be refunded for any 

reason. 

(c) Refinancing or assumption fee. 

The Program will assess a fee of one 

quarter of one (1) percent of the note to 

be refinanced or assumed. This fee is 

due upon application for refinancing or 

assumption of a guaranteed or direct 

loan. Upon submission, the fee shall be 

non-refundable. The Program may 

waive a refinancing or assumption fee’s 

payment when the refinancing or 

assumption’s primary purpose will 

benefit the United States. 

(d) Where payable. Fees are payable 

by check to ‘‘U.S. Department of 

Commerce/NOAA.’’ Other than those 

collected at application or closing, fees 

are payable by mailing checks to the 

‘‘U.S. Department of Commerce, 

National Oceanic and Atmospheric 

Administration, National Marine 

Fisheries Service,’’ to such address as 

the Program may designate. To ensure 

proper crediting, each check should 

include the official case number the 

Program assigns. 

§ 253.21 Demand by Guaranteed 

Noteholder and payment. 

Every demand by the guaranteed 

noteholder must be delivered in writing 

to the Program and must include the 

noteholder’s certified record of the date 

and amount of each payment made on 

the guaranteed note and the manner of 

its application. The only period during 

which a guaranteed noteholder can 

make demand for a payment default 

begins on the thirty-first day of the 

payment default and continues through 

the ninetieth day of a payment default. 

The noteholder must possess evidence 

of the demand’s timely delivery. 

§ 253.22 Program operating guidelines. 

The Program may issue policy and 

administrative guidelines, as the need 

arises. 

§ 253.23 Default and liquidation. 

Upon default under the terms of any 

note, guarantee, security agreement, 

mortgage, or other security document, 

the Program shall take remedial actions 

including but not limited to, where 

appropriate, retaking or arrest of 

collateral, foreclosure, restructuring, 

debarment, referral for debt collection, 

or liquidation as it deems best able to 

protect the U.S. Government’s interest. 

§ 253.24 Enforcement violations and 

adverse actions. 

(a) Compliance with applicable law. 

All applicants and Program participants 

shall comply with applicable law. 

(b) Applicant disqualification. 

(1) Any issuance of any citation or 

Notice of Violation and Assessment by 

NMFS enforcement or other 

enforcement authority may constitute 

grounds for the Program to: 

(1) Delay application or approval 

processing; 

(2) Delay loan closing; 

(3) Delay disbursement of loan 

proceeds; 


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(4) Disqualify an applicant or obligor; 

or 

(5) Declare default. 

(2) The Program will not approve 

loans or disburse funds to any applicant 

found to have an outstanding, final and 

unappealable fisheries fine or other 

unresolved penalty until either: (i) Such 

fine is paid or penalty has been 

resolved; or (ii) the applicant enters into 

an agreement to pay the penalty and 

makes all payments or installments as 

they are due. Failure to pay or resolve 

any such fine or penalty in a reasonable 

period of time will result in the 

applicant’s disqualification. 

(c) Foreclosure in addition to other 

penalties. In the event that a person 

with an outstanding balance on a 

Program loan or guarantee violates any 

ownership, lease, use, or other 

provisions of applicable law, such 

person may be subject to foreclosure of 

property, in addition to any fines, 

sanctions, or other penalties. 

§ 253.25 Other administrative 

requirements. 

(a) Debt Collection Act. In accordance 

with the provisions of the Debt 

Collection Improvement Act of 1996, a 

person may not obtain any Federal 

financial assistance in the form of a loan 

(other than a disaster loan) or loan 

guarantee if the person has an 

outstanding debt (other than a debt 

under the Internal Revenue Code of 

1986) with any Federal agency which is 

in a delinquent status, as determined 

under standards prescribed by the 

Secretary of the Treasury. 

(b) Certifications. Applicants must 

submit a completed Form CD–511, 

‘‘Certifications Regarding Debarment, 

Suspension and Other Responsibility 

Matters; Drug-Free Workplace 

Requirements and Lobbying,’’ or its 

equivalent or successor form, if any. 

(c) Taxpayer identification. An 

applicant classified for tax purposes as 

an individual, limited liability 

company, partnership, proprietorship, 

corporation, or legal entity is required to 

submit along with the application a 

taxpayer identification number (TIN) 

(social security number, employer 

identification number as applicable, or 

registered foreign organization number). 

Recipients who either fail to provide 

their TIN or provide an incorrect TIN 

may have application processing or 

funding suspended until the 

requirement is met. 

(d) Inspector General inquiry. An 

audit of a Program loan may be 

conducted at any time. Auditors, 

selected at the discretion of the Program 

or other agency of the United States, 

shall have access to any and all books, 

documents, papers and records of the 

obligor or any other party to a financing 

that the auditor(s) deem(s) pertinent, 

whether written, printed, recorded, 

produced or reproduced by any 

mechanical, magnetic or other process 

or medium. 

(e) Paperwork Reduction Act. The 

application requirements contained in 

these rules have been approved under 

OMB control number 0648–0012. The 

applications for the halibut/sablefish QS 

crew member eligibility certificate have 

been approved under OMB control 

number 0648–0272. Notwithstanding 

any other provisions of law, no person 

is required to respond to, nor shall any 

person be subject to a penalty for failure 

to comply with, a collection of 

information subject to the requirements 

of the Paperwork Reduction Act unless 

that collection of information displays a 

currently valid OMB control number. 

§ 253.26 Traditional loans. 

(a) Eligible projects. Financing or 

refinancing up to 80 percent of a 

project’s actual cost shall be available to 

any citizen who is determined to be 

eligible and qualified under the Act and 

these rules, except— 

(1) The Program will not finance the 

cost of new vessel construction. 

(2) The Program will not finance a 

vessel refurbishing project that 

materially increases an existing vessel’s 

harvesting capacity. 

(b) Financing or refinancing. 

(1) Projects, other than those specified 

in paragraphs (a)(1) and (a)(2) of this 

section, may be financed, as well as 

refinanced. 

(2) Notwithstanding paragraph (a)(1) 

of this section, the Program may 

refinance the construction cost of a 

vessel whose construction cost has 

already been financed (or otherwise 

paid) prior to the submission of a loan 

application. 

(3) Notwithstanding paragraph (a)(2) 

of this section, the Program may 

refinance the refurbishing cost of a 

vessel whose initial refurbishing cost 

has already been financed (or otherwise 

paid) prior to the submission of a loan 

application. 

(4) The Program may finance or 

refinance the purchase or refurbishment 

of any vessel or facility for which the 

Secretary has 

(i) Accelerated and/or paid 

outstanding debts or obligations, 

(ii) Acquired, or 

(iii) Sold at foreclosure. 

(c) Existing vessels and facilities. The 

Program may finance the purchase of an 

existing vessel or existing fishery 

facility if such vessel or facility will be 

refurbished in the United States and 

will be used in the fishing industry. 

(d) Fisheries modernization. 

Notwithstanding any of this part, the 

Program may finance or refinance any 

(1) Activities that assist in the 

transition to reduced fishing capacity; or 

(2) Technologies or upgrades designed 

to 

(i) Improve collection and reporting of 

fishery-dependent data, 

(ii) Reduce bycatch, 

(iii) Improve selectivity 

(iv) Reduce adverse impacts of fishing 

gear, or 

(v) To improve safety. 

(e) Guaranty transition. Upon 

application by the obligor, any 

guaranteed loans originated prior to 

October 11, 1996, may be refinanced as 

direct loans, regardless of the original 

purpose of the guaranteed loan. 

(f) Maturity. Maturity may not exceed 

25 years, but shall not exceed the 

project’s property useful life. The 

Program, at its sole discretion, may set 

a shorter maturity period. 

(g) Credit standards. Traditional loans 

are subject to all Fisheries Finance 

Program general credit standards and 

requirements. Collateral, guarantee and 

other requirements may be adjusted in 

accordance with the Program’s 

assessment of individual credit risks. 

§ 253.27 IFQ financing. 

The Program may finance or refinance 

the project cost of purchasing, including 

the reimbursement of obligors for 

expenditures previously made for 

purchasing, individual fishing quotas in 

accordance with the applicable sections 

of the Magnuson-Stevens Fishery 

Conservation and Management Act or 

any other statute. 

§ 253.28 Halibut sablefish IFQ loans. 

(a) Specific definitions. For the 

purposes of this section, the following 

definitions apply: 

(1) Entry-level fishermen means 

fishermen who do not own any IFQ in 

the year they apply for a loan. 

(2) Fishermen who fish from small 

vessels means fishermen wishing to 

purchase IFQ for use on Category B, 

Category C, or Category D vessels, but 

do not own, in whole or in part, any 

Category A or Category B vessels, as 

such vessels are defined in 50 CFR 

679.40(a)(5) of this title. 

(3) Halibut sablefish quota share 

means a halibut or sablefish permit, the 

face amount of which is used as the 

basis for the annual calculation of a 

person’s halibut or sablefish IFQ, also 

abbreviated as ‘‘HSQS’’ or ‘‘halibut/ 

sablefish QS.’’ 

(4) Halibut/Sablefish IFQ means the 

annual catch limit of halibut or sablefish 

that may be harvested by a person who 


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is lawfully allocated halibut or sablefish 

quota share, a harvest privilege for a 

specific portion of the total allowable 

catch of halibut or sablefish. 

(b) Entry level fishermen. The 

Program may finance up to 80 percent 

of the cost of purchasing HSQS by an 

entry level fisherman who: 

(1) Does not own any halibut/ 

sablefish QS during the origination year; 

(2) Applies for a loan to purchase a 

quantity of halibut/sablefish QS that is 

not greater than the equivalent of 8,000 

lb. (3,628.7 kg) of IFQ during the 

origination year; 

(3) Possesses the appropriate transfer 

eligibility documentation duly issued by 

RAM for HSQS; 

(4) Intends to be present aboard the 

vessel, as may be required by applicable 

regulations; and 

(5) Meets all other Program eligibility, 

qualification, lending and credit 

requirements. 

(c) Fishermen fishing from small 

vessels. The Program may finance up to 

80 percent of the cost of purchasing 

HSQS by a fisherman who fishes from 

a small vessel provided that any such 

fisherman shall: 

(1) Apply for a loan to purchase 

halibut or sablefish QS for use on vessel 

Categories B, C, or D, as defined under 

50 CFR 679.40(a)(5) of this title; 

(2) Does not own an aggregate 

quantity of halibut/sablefish QS 

(including the loan QS) is not more than 

the equivalent of 50,000 lb. (22,679.6 kg) 

of IFQ during the origination year; 

(3) Does not own, in whole or in part, 

directly or indirectly (including through 

stock or other ownership interest) any 

vessel of the type that would have been 

assigned Category A or Category B 

HSQS under 50 CFR 679.40(a)(5); 

(4) Possesses the appropriate transfer 

eligibility documentation duly issued by 

the RAM for HSQS; 

(5) Intends to be present aboard the 

vessel, as may be required by applicable 

regulations, as IFQ associated with 

halibut/sablefish QS financed by the 

loan is harvested; and 

(6) Shall meet all other Program 

eligibility, qualification, lending and 

credit requirements. 

(d) Refinancing. 

(1) The Program may refinance any 

existing debts associated with HSQS an 

applicant currently holds, provided 

that— 

(i) The HSQS being refinanced would 

have been eligible for Program financing 

at the time the applicant purchased it, 

and 

(ii) The applicant meets the Program’s 

applicable lending requirements. 

(2) The refinancing is in an amount 

up to 80 percent of HSQS’ current 

market value, and subject to the 

limitation that the Program will not 

disburse any amount that exceeds the 

outstanding principal balance, plus 

accrued interest (if any), of the existing 

HSQS debt being refinanced. 

(3) In the event that the current 

market value of HSQS and principal 

loan balance do not meet the 80 percent 

requirement in paragraph (d)(2) of this 

section, applicants seeking refinancing 

may be required to provide additional 

down payment. 

(e) Maturity. Loan maturity may not 

exceed 25 years, but may be shorter 

depending on credit and other 

considerations. 

(f) Repayment. Repayment will be by 

equal quarterly installments of principal 

and interest. 

(g) Security. Although quota share(s) 

will be the primary collateral for a 

HSQS loan, the Program may require 

additional security pledges to maintain 

the priority of the Program’s security 

interest. The Program, at its option, may 

also require all parties with significant 

ownership interests to personally 

guarantee loan repayment for any 

applicant that is a corporation, 

partnership, or other entity. Subject to 

the Program’s credit risk determination, 

some projects may require additional 

security, collateral, or credit 

enhancement. 

(h) Crew member transfer eligibility 

certification. The Program will accept 

RAM certification as proof that 

applicants are eligible to hold HSQS. 

The application of any person 

determined by RAM to be unable to 

receive such certification will be 

declined. Applicants who fail to obtain 

appropriate transfer eligibility 

certification within 45 working days of 

the date of application may lose their 

processing priority. 

(i) Program credit standards. HSQS 

loans, regardless of purpose, are subject 

to all Program general credit standards 

and requirements. Collateral, guarantee 

and other requirements may be adjusted 

to individual credit risks. 

§ 253.29 CDQ loans. 

(a) FFP actions. The Program may 

finance or refinance up to 80 percent of 

a project’s actual cost. 

(b) Eligible projects. Eligible projects 

include the purchase of all or part of 

ownership interests in fishing or 

processing vessels, shoreside fish 

processing facilities, permits, quota, and 

cooperative rights in any of the Bering 

Sea and Aleutian Islands fisheries. 

(c) Eligible entities. The following 

communities, in accordance with 

applicable law and regulations are 

eligible to participate in the loan 

program. 

(1) The villages of Akutan, Atka, False 

Pass, Nelson Lagoon, Nikolski, and 

Saint George through the Aleutian 

Pribilof Island Community Development 

Association. 

(2) The villages of Aleknagik, Clark’s 

Point, Dillingham, Egegik, Ekuk, Ekwok, 

King Salmon/Savonoski, Levelock, 

Manokotak, Naknek, Pilot Point, Port 

Heiden, Portage Creek, South Naknek, 

Togiak, Twin Hills, and Ugashik 

through the Bristol Bay Economic 

Development Corporation. 

(3) The village of Saint Paul through 

the Central Bering Sea Fishermen’s 

Association. 

(4) The villages of Chefornak, Chevak, 

Eek, Goodnews Bay, Hooper Bay, 

Kipnuk, Kongiganak, Kwigillingok, 

Mekoryuk, Napakiak, Napaskiak, 

Newtok, Nightmute, Oscarville, 

Platinum, Quinhagak, Scammon Bay, 

Toksook Bay, Tuntutuliak, and Tununak 

through the Coastal Villages Region 

Fund. 

(5) The villages of Brevig Mission, 

Diomede, Elim, Gambell, Golovin, 

Koyuk, Nome, Saint Michael, Savoonga, 

Shaktoolik, Stebbins, Teller, Unalakleet, 

Wales, and White Mountain through the 

Norton Sound Economic Development 

Corporation. 

(6) The villages of Alakanuk, 

Emmonak, Grayling, Kotlik, Mountain 

Village, and Nunam Iqua through the 

Yukon Delta Fisheries Development 

Association. 

(7) Any new groups established by 

applicable law. 

(d) Loan terms. 

(1) CDQ loans may have terms up to 

thirty years, but shall not exceed the 

project’s property useful life. The 

Program, at its sole discretion, may set 

a shorter maturity period. 

(2) CDQ loans are subject to all 

Fisheries Finance Program general 

credit standards and requirements. 

Collateral, guarantee and other 

requirements may be adjusted to 

individual credit risks. 

§ 253.30 Crab IFQ loans. 

(a) Specific definitions. For the 

purposes of this section, the following 

definitions apply: 

(1) Crab means those crab species 

managed under the Fishery 

Management Plan for Bering Sea/ 

Aleutian Island (BSAI) King and Tanner 

Crab. 

(2) Crab FMP means the Fishery 

Management Plan for BSAI King and 

Tanner Crab. 

(3) Crab quota share means a BSAI 

King and Tanner Crab permit, the base 

amount of which is used as a basis for 


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the annual calculation of a person’s 

Crab IFQ, also abbreviated as ‘‘Crab QS.’’ 

(b) Crab captains or crewmen. The 

Program may finance up to 80 percent 

of the cost of purchasing Crab QS by a 

citizen: 

(1) Who is or was: 

(i) A captain of a crab fishing vessel, 

or 

(ii) A crew member of a crab fishing 

vessel; 

(2) Who has been issued the 

appropriate documentation of eligibility 

by RAM; 

(3) Whose aggregate holdings of QS 

will not exceed the aggregate limit on 

Crab QS holdings that may be in effect 

in the Crab FMP implementing 

regulations or applicable statutes in 

effect at the time of loan closing; and 

will not hold either individually or 

collectively, based on the initial QS 

pool, as published in 50 CFR part 680, 

Table 8; 

(4) Who, at the time of initial 

application, meets all other applicable 

eligibility requirements to fish for crab 

or hold Crab QS contained in the Crab 

FMP implementing regulations or 

applicable statutes in effect at the time 

of loan closing. 

(c) Refinancing. 

(1) The Program may refinance any 

existing debts associated with Crab QS 

that an applicant currently holds, 

provided that: 

(i) The Crab QS being refinanced 

would have been eligible for Program 

financing at the time the applicant 

purchased it; 

(ii) The applicant meets the Program’s 

applicable lending requirements; and 

(iii) The applicant would meet the 

requirements found in the Crab FMP 

implementing regulations at the time 

any such refinancing loan would close. 

(2) The Program may refinance an 

amount up to 80 percent of Crab QS’s 

current market value, subject to the 

limitation that the Program will not 

disburse any amount that exceeds the 

outstanding principal balance, plus 

accrued interest (if any), of the existing 

Crab QS debt being refinanced. 

(3) In the event that the current 

market value of Crab QS and current 

principal balance do not meet the 80 

percent requirement in paragraph (c)(2) 

of this section, applicants seeking 

refinancing may be required to provide 

additional down payment. 

(d) Maturity. Loan maturity may not 

exceed 25 years, but may be shorter 

depending on credit and other 

considerations. 

(e) Repayment. Repayment schedules 

will be set by the loan documents. 

(f) Security. Although the quota share 

will be the primary collateral for a Crab 

QS loan, the Program may require 

additional security pledges to maintain 

the priority of the Program’s security 

interest. The Program, at its option, may 

also require all parties with significant 

ownership interests to personally 

guarantee loan repayment for any 

applicant that is a corporation, 

partnership, or other entity. Subject to 

the Program’s credit risk determination, 

some projects may require additional 

security, collateral, or credit 

enhancement. 

(g) Crew member transfer eligibility 

certification. The Program will accept 

RAM transfer eligibility certification as 

proof that applicants are eligible to hold 

Crab QS. The application of any person 

determined by RAM to be unable to 

receive such certification will be 

declined. Applicants who fail to obtain 

appropriate transfer eligibility 

certification within 45 working days of 

the date of application may lose their 

processing priority. 

(h) Crab Quota Share Ownership 

Limitation. A program obligor must 

comply with all applicable maximum 

amounts, as may be established by 

NMFS regulations, policy or North 

Pacific Fishery Management Council 

action. 

(i) Program credit standards. Crab QS 

loans are subject to all Program general 

credit standards and requirements. 

Collateral, guarantee and other 

requirements may be adjusted to 

individual credit risks. 

Subpart C—Interjurisdictional 

Fisheries 

§ 253.50 Definitions. 

The terms used in this subpart have 

the following meanings: 

Act means the Interjurisdictional 

Fisheries Act of 1986, Public Law 99– 

659 (Title III). 

Adopt means to implement an 

interstate fishery management plan by 

State action or regulation. 

Commercial fishery failure means a 

serious disruption of a fishery resource 

affecting present or future productivity 

due to natural or undetermined causes. 

It does not include either: 

(1) The inability to harvest or sell raw 

fish or manufactured and processed 

fishery merchandise; or 

(2) Compensation for economic loss 

suffered by any segment of the fishing 

industry as the result of a resource 

disaster. 

Enforcement agreement means a 

written agreement, signed and dated, 

between a state agency and either the 

Secretary of the Interior or Secretary of 

Commerce, or both, to enforce Federal 

and state laws pertaining to the 

protection of interjurisdictional fishery 

resources. 

Federal fishery management plan 

means a plan developed and approved 

under the Magnuson Fishery 

Conservation and Management Act (16 

U.S.C. 1801 et seq.). 

Fisheries management means all 

activities concerned with conservation, 

restoration, enhancement, or utilization 

of fisheries resources, including 

research, data collection and analysis, 

monitoring, assessment, information 

dissemination, regulation, and 

enforcement. 

Fishery resource means finfish, 

mollusks, and crustaceans, and any 

form of marine or Great Lakes animal or 

plant life, including habitat, other than 

marine mammals and birds. 

Interjurisdictional fishery resource 

means: 

(1) A fishery resource for which a 

fishery occurs in waters under the 

jurisdiction of one or more states and 

the U.S. Exclusive Economic Zone; or 

(2) A fishery resource for which an 

interstate or a Federal fishery 

management plan exists; or 

(3) A fishery resource which migrates 

between the waters under the 

jurisdiction of two or more States 

bordering on the Great Lakes. 

Interstate Commission means a 

commission or other administrative 

body established by an interstate 

compact. 

Interstate compact means a compact 

that has been entered into by two or 

more states, established for purposes of 

conserving and managing fishery 

resources throughout their range, and 

consented to and approved by Congress. 

Interstate Fisheries Research Program 

means research conducted by two or 

more state agencies under a formal 

interstate agreement. 

Interstate fishery management plan 

means a plan for managing a fishery 

resource developed and adopted by the 

member states of an Interstate Marine 

Fisheries Commission, and contains 

information regarding the status of the 

fishery resource and fisheries, and 

recommends actions to be taken by the 

States to conserve and manage the 

fishery resource. 

Landed means the first point of 

offloading fishery resources. 

NMFS Regional Director means the 

Director of any one of the five National 

Marine Fisheries Service regions. 

Project means an undertaking or a 

proposal for research in support of 

management of an interjurisdictional 

fishery resource or an interstate fishery 

management plan. 


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Research means work or investigative 

study, designed to acquire knowledge of 

fisheries resources and their habitat. 

Secretary means the Secretary of 

Commerce or his/her designee. 

State means each of the several states, 

the District of Columbia, the 

Commonwealth of Puerto Rico, 

American Samoa, the Virgin Islands, 

Guam, or the Commonwealth of the 

Northern Mariana Islands. 

State agency means any department, 

agency, commission, or official of a state 

authorized under the laws of the State 

to regulate commercial fisheries or 

enforce laws relating to commercial 

fisheries. 

Value means the monetary worth of 

fishery resources used in developing the 

apportionment formula, which is equal 

to the price paid at the first point of 

landing. 

Volume means the weight of the 

fishery resource as landed, at the first 

point of landing. 

§ 253.51 Apportionment. 

(a) Apportionment formula. The 

amount of funds apportioned to each 

state is to be determined by the 

Secretary as the ratio which the equally 

weighted average of the volume and 

value of fishery resources harvested by 

domestic commercial fishermen and 

landed within such state during the 3 

most recent calendar years for which 

data satisfactory to the Secretary are 

available bears to the total equally 

weighted average of the volume and 

value of all fishery resources harvested 

by domestic commercial fishermen and 

landed within all of the states during 

those calendar years. 

(1) The equally weighted average 

value is determined by the following 

formula: 

Volume of X State

Volume of all States = A percent

Value of X State

Value of all States = B percent

[A% B%]

2 State percentage used to determine state’s share + = of the total available funds

(2) Upon appropriation of funds by 

Congress, the Secretary will take the 

following actions: 

(i) Determine each state’s share 

according to the apportionment formula. 

(ii) Certify the funds to the respective 

NMFS Regional Director. 

(iii) Instruct NMFS Regional Directors 

to promptly notify states of funds’ 

availability. 

(b) No state, under the apportionment 

formula in paragraph (a) of this section, 

that has a ratio of one-third of 1 percent 

or higher may receive an apportionment 

for any fiscal year that is less than 1 

percent of the total amount of funds 

available for that fiscal year. 

(c) If a State’s ratio under the 

apportionment formula in paragraph (b) 

of this section is less than one-third of 

1 percent, that state may receive funding 

if the state: 

(1) Is signatory to an interstate fishery 

compact; 

(2) Has entered into an enforcement 

agreement with the Secretary and/or the 

Secretary of the Interior for a fishery 

that is managed under an interstate 

fishery management plan; 

(3) Borders one or more of the Great 

Lakes; 

(4) Has entered into an interstate 

cooperative fishery management 

agreement and has in effect an interstate 

fisheries management plan or an 

interstate fisheries research Program; or 

(5) Has adopted a Federal fishery 

management plan for an 

interjurisdictional fishery resource. 

(d) Any state that has a ratio of less 

than one-third of 1 percent and meets 

any of the requirements set forth in 

paragraphs (c)(1) through (5) of this 

section may receive an apportionment 

for any fiscal year that is not less than 

0.5 percent of the total amount of funds 

available for apportionment for such 

fiscal year. 

(e) No state may receive an 

apportionment under this section for 

any fiscal year that is more than 6 

percent of the total amount of funds 

available for apportionment for such 

fiscal year. 

(f) Unused apportionments. Any part 

of an apportionment for any fiscal year 

to any state: 

(1) That is not obligated during that 

year; 

(2) With respect to which the state 

notifies the Secretary that it does not 

wish to receive that part; or 

(3) That is returned to the Secretary 

by the state, may not be considered to 

be appropriated to that state and must 

be added to such funds as are 

appropriated for the next fiscal year. 

Any notification or return of funds by a 

state referred to in this section is 

irrevocable. 

§ 253.52 State projects. 

(a) General— 

(1) Designation of state agency. The 

Governor of each state shall notify the 

Secretary of which agency of the state 

government is authorized under its laws 

to regulate commercial fisheries and is, 

therefore, designated receive financial 

assistance awards. An official of such 

agency shall certify which official(s) is 

authorized in accordance with state law 

to commit the state to participation 

under the Act, to sign project 

documents, and to receive payments. 

(2) States that choose to submit 

proposals in any fiscal year must so 

notify the NMFS Regional Director 

before the end of the third quarter of 

that fiscal year. 

(3) Any state may, through its state 

agency, submit to the NMFS Regional 

Director a completed NOAA Grants and 

Cooperative Agreement Application 

Package with its proposal for a project, 

which may be multiyear. Proposals 

must describe the full scope of work, 

specifications, and cost estimates for 

such project. 

(4) States may submit a proposal for 

a project through, and request payment 

to be made to, an Interstate Fisheries 

Commission. Any payment so made 

shall be charged against the 

apportionment of the appropriate 

state(s). Submitting a project through 

one of the Commissions does not 

remove the matching funds requirement 

for any state, as provided in paragraph 

(c) of this section. 

(b) Evaluation of projects. The 

Secretary, before approving any 

proposal for a project, will evaluate the 

proposal as to its applicability, in 

accordance with 16 U.S.C. 4104(a)(2). 

(c) State matching requirements. The 

Federal share of the costs of any project 

conducted under this subpart, including 

a project submitted through an Interstate 

Commission, cannot exceed 75 percent 

of the total estimated cost of the project, 

unless: 

(1) The state has adopted an interstate 

fishery management plan for the fishery 

resource to which the project applies; or 

(2) The state has adopted fishery 

regulations that the Secretary has 

determined are consistent with any 

Federal fishery management plan for the 

species to which the project applies, in 

which case the Federal share cannot 


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exceed 90 percent of the total estimated 

cost of the project. 

(d) Financial assistance award. If the 

Secretary approves or disapproves a 

proposal for a project, he or she will 

promptly give written notification, 

including, if disapproved, a detailed 

explanation of the reason(s) for the 

disapproval. 

(e) Restrictions. 

(1) The total cost of all items included 

for engineering, planning, inspection, 

and unforeseen contingencies in 

connection with any works to be 

constructed as part of such a proposed 

project shall not exceed 10 percent of 

the total cost of such works, and shall 

be paid by the state as a part of its 

contribution to the total cost of the 

project. 

(2) The expenditure of funds under 

this subpart may be applied only to 

projects for which a proposal has been 

evaluated under paragraph (b) of this 

section and approved by the Secretary, 

except that up to $25,000 each fiscal 

year may be awarded to a state out of 

the state’s regular apportionment to 

carry out an ‘‘enforcement agreement.’’ 

An enforcement agreement does not 

require state matching funds. 

(f) Prosecution of work. All work must 

be performed in accordance with 

applicable state laws or regulations, 

except when such laws or regulations 

are in conflict with Federal laws or 

regulations such that the Federal law or 

regulation prevails. 

§ 263.53 Other funds. 

(a) Funds for disaster assistance. 

(1) The Secretary shall retain sole 

authority in distributing any disaster 

assistance funds made available under 

section 308(b) of the Act. The Secretary 

may distribute these funds after he or 

she has made a thorough evaluation of 

the scientific information submitted, 

and has determined that a commercial 

fishery failure of a fishery resource 

arising from natural or undetermined 

causes has occurred. Funds may only be 

used to restore the resource affected by 

the disaster, and only by existing 

methods and technology. Any fishery 

resource used in computing the states’ 

amount under the apportionment 

formula in § 253.601(a) will qualify for 

funding under this section. The Federal 

share of the cost of any activity 

conducted under the disaster provision 

of the Act shall be limited to 75 percent 

of the total cost. 

(2) In addition, pursuant to section 

308(d) of the Act, the Secretary is 

authorized to award grants to persons 

engaged in commercial fisheries, for 

uninsured losses determined by the 

Secretary to have been suffered as a 

direct result of a fishery resource 

disaster. Funds may be distributed by 

the Secretary only after notice and 

opportunity for public comment of the 

appropriate limitations, terms, and 

conditions for awarding assistance 

under this section. Assistance provided 

under this section is limited to 75 

percent of an uninsured loss to the 

extent that such losses have not been 

compensated by other Federal or State 

Programs. 

(b) Funds for interstate commissions. 

Funds authorized to support the efforts 

of the three chartered Interstate Marine 

Fisheries Commissions to develop and 

maintain interstate fishery management 

plans for interjurisdictional fisheries 

will be divided equally among the 

Commissions. 

§ 253.54 Administrative requirements. 

Federal assistance awards made as a 

result of this Act are subject to all 

Federal laws, Executive Orders, Office 

of Management and Budget Circulars as 

incorporated by the award; Department 

of Commerce and NOAA regulations; 

policies and procedures applicable to 

Federal financial assistance awards; and 

terms and conditions of the awards. 

[FR Doc. 2010–10270 Filed 5–4–10; 8:45 am] 

BILLING CODE 3510–22–P 


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